Is a recession still looming?
Capital Economics deputy chief economist Ruth Gregory warned that the country could still slip into recession this year despite positive economic news.
Britain’s GDP for the fourth quarter of 2022 has been revised upwards today, raising the chances of the country escaping a recession this year.
However, Gregory said she still expects a decline as most of the impact of recent rate hikes has not yet filtered through to the wider economy.
“Overall, today’s numbers suggest that households have a slightly larger buffer than we expected to cope with rising interest rates,” she said. “However, with household savings below the pre-pandemic trend in real terms, we still think savings will be less robust this year.
“And as about two-thirds of the drag on real activity from rising interest rates from 0.10% to 4.25% has yet to be felt, the numbers do not change our view that the economy will slide into recession peaking at by a drop in real GDP of about 1.0%.”
FTSE 100 heads for fifth consecutive day of gains
The London FTSE 100 is making modest gains in early trading, enough to stay on track for a fifth consecutive positive session on the last trading day of Q1 2023.
The main UK stock index added 8 points to 7628.01, up 0.1%.
Travel and tourism stocks stood out on the leaderboard following upbeat comments from brokers about the sector. Barclays raised its price target for easyJet’s share from 510 pence to 570 pence, taking it up 17 pence to 518 pence, a 3% increase that was the biggest of the morning.
IAG, the owner of British Airways, was in second place, up more than 3p to 151.4p, an increase of almost 3%. It was boosted by a separate analysis from Deutsche Bank, which raised the price target for the stock from 180 pence to 200 pence.
News of the ninth consecutive monthly drop in house prices hit housing developers. Persimmon fell 11p to 1257p. Barratt Developments was down 2.3p to 470p.
Cybersecurity stocks under pressure as two companies issue profit warnings
Cybersecurity stocks are under pressure after two companies in the space announced profit warnings this morning.
Shares of NCC Group plummeted as it announced earnings for the year were now expected to be £28m – 40% lower than previously thought.
Meanwhile, the Shearwater Group now expects essentially no profit, with earnings “significantly below market expectations”. Shares fell nearly 40%.
Both companies attribute the declines to the broader declines in the technology sector, which led their customers to reduce or postpone spending on cybersecurity services.
The announcements affected other cybersecurity companies, with Darktrace’s shares falling 2.1%.
Rolls-Royce’s top-level realignment begins as new CEO Erginbilgic selects his top team
Shortly after taking office, new Rolls-Royce CEO Tufan Erginbilgic began shaking up the top management of the world-famous engineer whom he likened to a ‘burning platform’.
BP chief executive Helen McCabe joins and becomes chief financial officer, replacing Panos Kakoullis, who will remain in this position at the Derby-based company until the end of August at the earliest.
Insider Rob Watson will take office immediately as president of Rolls-Royce’s civil aerospace division. His predecessor, Chris Cholerton, will become group president and will assume responsibility for the company’s nuclear operations, including small modular reactor (SMR) and submarine operations. Tom Samson is leaving the SMR business “effective immediately”.
Adam Riddle will direct Rolls’ North American operations, a position previously held by Tom Bell.
Erginbilgic said: “With the leadership changes announced today, we are moving at the pace and gaining the momentum we need to transform Rolls-Royce.”
Virgin Orbit is on brink after laying off 85% of staff
Richard Branson’s Virgin Orbit is on the verge of collapse after the company said it would lay off 85% of its staff because it couldn’t get enough funding.
Nearly 700 employees are about to leave the company, whose inaugural rocket launch attempt unexpectedly failed earlier this year.
“We have no choice but to make immediate, dramatic and extremely painful changes,” Virgin Orbit CEO Dan Hart told employees, according to CNBC.
Nationwide: House prices fell for the 9th month in a row in March
Home prices fell 3.1% in the year to March, the fastest decline since July 2009, according to the latest data from Nationwide. It was the ninth consecutive month of price falls, according to the mortgage bank. London recorded a 1.4% drop to an average price of £511,293
Gains expected for FTSE 100 after GDP revised up — the UK economy grew in the fourth quarter
A better picture for the UK economy in the last quarter of last year helps the FTSE 100 on its way to its fifth consecutive rise of the week, bringing confidence back to the market.
Revised figures from the Office for National Statistics show that the size of the economy grew by 0.1% quarter on quarter in the last three months of 2022, instead of remaining stable.
The improved view in the updated data is the latest good news for the UK economy, after the Bank of England and OBR both announced earlier this month that they do not expect a recession this year.
According to stock market opening calls from spread betting firm CMC, the FTSE 100 will add 10 points in the opening trade to 7,630, setting course for its fifth consecutive day of gains.