Proactive Investors -
- FTSE 100 puhses higher, up 36 points
- IDS rises as Royal Mail (LON:IDSI) strikes pay deal with CWU
- Network International, THG (LON:THG) soar on bid approachs
UK's economic prospects improving but growth to remain subdued
The EY Item Club is less pessimistic about prospects for the UK economy than before.
The economic thinktank believes the UK will avoid a recession but growth this year will be subdued.
Government cost of living payments and energy bill subsidies supported households psychologically and financially more than expected at the end of last year, the EY Item Club said.
The forecasting group expects the gross domestic product (GDP) measure of output to rise by 0.2% a significant upgrade from the 0.7% decline expected in its January forecast. Output is then expected to rise by 1.9% next year and 2.3% in 2025.
The economy is expected to flatline in the first half of the year and narrowly avoid meeting the recession criteria of two consecutive quarters of negative growth. In the second half of the year a return to growth is expected as inflation and household bills fall sharply.
Inflation will begin to decline quickly because prices this year are compared with already high prices last year, and household bills are set to drop from July once households benefit from the sharp decline in natural gas prices over winter, the EY Item Club said.
THG surges on bid approach
The pick up in M&A activity in London continues with news that THG PLC has received a preliminary approach from Apollo Global Management.
Shares surged over 35% as THG - which was responding to press speculation - said it had received a "highly preliminary and non-binding indicative proposal" from the private equity firm.
The news adds to the flurry of activity in London which has seen a number of companies confirm bid approaches.
Private equity firms are leading the way with Apollo itself engaged in ongoing talks to buy John Wood, while there have also been approaches for Network International from CVC and Dechra Pharmaceuticals (LON:DPH) from EQT.
RS firms as RBC upgrades to outperform
RS Group (LON:RS1R) sits top of the FTSE 100 risers benefiting from an upgrade by RBC Capital Markets.
The broker pointed out the stock has underperformed the FTSE100 by around 30% since peaking on bid speculation last August.
Growth expectations have reduced, the CEO and US management uncertainty has been removed, RS1 has done an excellent job on margins and valuation has come back to an attractive level, RBC believes.
“We continue to see RS as a long-term winner with the potential for further share gains and the strong balance sheet provides options in the current environment,” the broker added.
As a result, it upgraded the stock to outperform from sector perform with a 1,000p price target.
Shares rose 2.3% to 868.80p. Meanwhile, the FTSE 100 is holding above 7,900, up 33 points.
CFOs mood brightens according to Deloitte
Sentiment among CFOs has improved significantly since the start of the year helped by lower energy prices, falling inflation and easing of concerns over Brexit.
That was the findings of Deloitte’s quarterly survey of finance chiefs.
Confidence rose sharply in the first quarter, to above its long-term average, and perceptions of uncertainty have fallen at the fastest rate since the survey began more than 12 years ago.
CFOs reported a marked easing of supply chain and recruitment problems while expectations for inflation in one year’s time have declined from 5.8% to 4.2%.
But despite the improved sentiment, CFOs maintain a defensive strategy stance.
Risk appetite is below normal levels and CFOs are heavily focussed on cost control and building up cash.
Ian Stewart, chief economist at Deloitte said: “The economic unpredictability that marked the beginning of 2023 has started to clear, with CFOs reporting the largest decline in perceptions of uncertainty to date.”
“Business confidence has rebounded, helped by a decrease in energy prices, an easing of Brexit concerns and an improving inflation backdrop.”
“Crucially, finance leaders report little change in credit conditions, suggesting that March’s events in the global banking system have not affected the pricing and availability of credit for UK corporates.”
Stewart said CFOs foresee artificial intelligence helping to drive UK productivity, an outcome that could provide a lasting boost to business growth.
But they are divided, however, on how AI will affect the number of jobs in the economy, highlighting the need to ensure the gains from new technologies are widely shared.