Proactive Investors -
- FTSE 100 rally running out steam, up 20 points
- US banks pump US$30bn into First Republic
- EU inflation eases to 8.5% in February, in line
UK only G20 economy, other than Russia, that will shrink in 2023
The UK will be the only economy in the G20 apart from Russia to shrink this year as high inflation, the energy crisis and low productivity hinder its recovery, according to the OECD.
The OECD said all major EU economies will expand in 2023 at a stronger pace than it had forecast last year, leaving Britain and Russia the only members of the G20 group of wealthy nations to suffer a decline.
In its half-yearly outlook, the Paris-based organisation said the UK economic outlook had improved slightly compared with its forecast in November of a 0.4% contraction, largely in response to falling gas prices, but would still shrink by 0.2% this year.
Overall it raised its global economic growth forecast as inflation eases and China emerges from Covid restrictions, but warned of vulnerabilities as seen in the US bank sector turmoil. It now expects the global economy to grow by 2.6% this year compared to 2.2% in its previous forecast in November.
US triple witching likely to add to Friday's fun
As if traders don't have know to fret about, Friday’s options expiration in the US could cause further volatility.
An estimated US$2.7 trillion of derivatives spanning an estimated 102mln contracts tied to stocks and indexes are scheduled to mature, obliging Wall Street managers to either roll over existing positions or start new ones. The process usually involves portfolio adjustments that lead to a spike in trading volume and sudden price swings.
Triple witching is the simultaneous expiration of stock options, stock index futures, and stock index options contracts all on the same trading day. This happens four times a year: on the third Friday of March, June, September, and December. So today is the day.
Back in London and the FTSE 100's rally is in danger of running out of steam, with the lead index now up just 20 points.
London Stock Exchanged lifted by UBS upgrade
One prominent riser today is London Stock Exchange Group PLC.
UBS has upgraded the stock to’buy’ from ‘hold’ and raised its price target 2% to £87.
The Swiss bank has taken a bullish view on revenue growth estimates predicting compound annual growth rates between 2022-25 of 8%, above the market consensus of 7.2%, largely driven by an upgrade to the outlook for the company’s Trading & Banking division.
“We argue LSEG shares are cheap at current levels, trading at the lower end of its 24-month trading range
of £70-85.” The broker noted the forward P/E multiple (using consensus estimates) of 20x is near a 5-
year low and given the improved messaging from the company following its full-year 2022 results, views the risk-reward profile to be very favourable at current valuations.
“We think LSEG can comfortably increase its revenue growth outlook to 6-8%, putting it inline with the targeted revenue growth rates of several of US Info Services companies which we think will drive multiple expansion,” analysts at UBS wrote.
Shares in London Stock Exchange rose 1.6% to 7,400p mid-morning on Friday.
Meanwhile the FTSE 100 has slipped back from earlier highs, now up 38 points.