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FTSE 100 Live: Stocks surge higher as GDP flatlines; L&G falls after revamp as Rentokil rallies

Published 12/06/2024, 09:55
Updated 12/06/2024, 10:10
© Reuters.  FTSE 100 Live: Stocks surge higher as GDP flatlines; L&G falls after revamp as Rentokil rallies

Proactive Investors -

  • FTSE 100 up by 64 points at 8,211
  • GDP flat at 0% for April
  • L&G tumbles as Rentokil soars

9.55am: Overnight in the US

Musk has been making headlines regarding both OpenAI and Tesla overnight in the US.

A day after warning that he would ban Apple (NASDAQ:AAPL) products if it continued with its partnership with OpenAI, the world's richest man withdrew his lawsuit against the ChatGPT creator.

Musk had initially lodged a lawsuit accusing the company of abandoning its orginal aim to make artificial intelligence for the benefit of humanity not for profit.

However, without reason, the Tesla and SpaceX boss asked the Californian state court to dismiss the accusations.

While Musk was dismissing lawsuits, shareholders in Tesla were lodging some after an institutional shareholder alleged he had made billions by using insider information.

The Employees' Retirement System of Rhode Island filed the lawsuit in the hopes the courts will force Musk to return all "unlawful profits".

Memstock Gamestop rose around 22% before dropping 5% in the aftermarket as it confirmed it had completed an "at-the-market" equity raise of US$2.14 billion.

GameStop (NYSE:GME) said it sold the maximum 75 million shares placed under the program.

Finally, Shari Redstone, the American media executive whose family is the largest shareholder of Paramount, cut talks with Skydance Media, ending the chance for David Ellison's firm to become the controlling owner of the media conglomerate.

9.33am: National Grid (LON:NG) sees success in rights issue; shares remain subdued

National Grid lifted over 1% this morning after it confirmed 91% of investors bought new shares through its £7 billion rights issue, with those unbought going to underwriters Barclays (LON:BARC) and JP Morgan in a bid to find new buyers or else take them up themselves.

Grid’s fundraising was seen as a bold move by analysts given the seeming lack of appetite for new equities in London.

Heavyweight brokers such as UBS and Citi weighed in with 'buy' recommendations during the ex-rights trading period, but this was not enough to sway all investors.

Another bank, Jefferies reduced its earnings per share forecast by 14% for the 2025 financial year following the rights issue dilution and was worried about the regulatory uncertainty over the next year.

Shares remain down 14% in the last month, down around 16% since the electricity firm announced the rights isssue.

9.17am: Oil prices rise despite warnings of a "major surplus" this decade

Oil prices have rallied this morning despite the International Energy Agency's warning that the world will face a "major surplus" of the commodity by the end of the 2020s.

Slowing demand caused by the transition to greener energy and an uptick in production are expected to cause a rise in oil supplies, the IEA said.

Brent crude prices shrugged off the warning, with the price per barrel rising by 0.6% to US$82.40, while West Texas Intermediate enjoyed a gain of 0.8% to US$78.52.

Global oil production is expected to outgrow demand before 2030, with countries like the US and those in the Americas set to drive the surge in supplies.

"As the pandemic rebound loses steam, clean energy transitions advance, and the structure of China’s economy shifts, growth in global oil demand is slowing down and set to reach its peak by 2030," said Fatih Birol, the executive direct at IEA.

"This year, we expect demand to rise by around one million barrels per day.

"This report’s projections, based on the latest data, show a major supply surplus emerging this decade, suggesting that oil companies may want to make sure their business strategies and plans are prepared for the changes taking place."

Both Shell (LON:SHEL) and BP (LON:BP) also showed resilience in the face of the warning, with both companies' shares rising by a little under 1% today.

9.07am: Analysts react to Legal & General's shake-up

Legal & General shares are holding lower, down by around 3%, after the market spurned its latest plans to sell the housebuilder Cala, merge divisions, and initiate a £200 million share buyback, aiming for a "simpler, better-connected L&G".

Panmure Gordon in a short assessment of the announcement said newly incoming boss Antonio Simoes had probably done 'just enough', but it also noted there may be some disappointment around the dividend growth.

Analysts at UBS maintained their price target of 258p and neutral rating for the stock, predicting a near 6% increase in its shares within the next twelve months.

The Swiss bank had expected L&G to receive a "small positive reaction" to the plans due to "stronger near-term capital returns".

UBS believes there is more than a 5% upside for the group's shareholder returns, despite dividend growth of 5% in 2024 being expected to lower to 2% by 2027.

"If we assume £200m per year of recurring share buybacks and 2% dividend per share growth we only see marginal upside (

8.44am: From Mickey Mouse to No More Mouse

Nelson Peltz may be still rueing from his failed attempt to acquire a seat on the Mickey Mouse creator's board as he has switched his attention to pest control.

Rentokil is doing a large portion of the lifting for the FTSE 100 this morning after it was revealed the billionaire fund manager and activist investor had developed a stake in the company.

Shares in the Crawley-based group surged more than 13.5% to 470p after Peltz's investment firm Trian Fund Management said it had opened a "significant position" in the company, placing it as one of the top ten largest shareholders.

Peltz's firm said it "reached out to Rentokil to discuss ideas and initiatives to improve shareholder value”.

Since the start of March, shares in the firm had dropped more than 18%, but today's gains have offset much of this and are now pushing it closer to its 2024 high of 504p.

Back in April, Peltz failed to secure a seat on the Dinsey board having waged a campaign against the conglomerate's management, claiming it was lagging behind rivals in various industries.

8.29am: UK recovery to be steady rather than spectacular, says economists

Economists have said improved household incomes and an improvement in consumer confidence will be vital in the country's recovery over both 2024 and 2025.

Yet, Peter Arnold, EY UK's chief economist, believes the slow reaction from the Bank of England to slash interest rates will mean the improvement is gradual.

"Tighter fiscal policy and the lagged passthrough of past interest rate rises are likely to mean that the UK economy’s exit from its long period of stagnation will be steady rather than spectacular,” he said.

"Early business survey data has signalled that private sector activity growth remained robust across the first two months of the quarter. However, planned strikes in the healthcare sector at the end of June will likely weigh on activity."

Looking forward, he said he expects quarter-on-quarter GDP growth to be slower in the second quarter than in the first three months of the year.

8.20am: FTSE 100 kicks higher

The FTSE 100 has opened around 0.6% higher, up by around 51 points, to 8,198 on Tuesday as the markets welcome the prospect of further economic growth despite GDP figures flatlining in April due to wet weather.

Blue chip shares had been on the slide on both Monday and Tuesday after the geopolitical uncertainty driven by Macron's snap election filtered through to markets across the globe.

Gross domestic product hit 0% for April, weakening on the 0.4% growth experienced in March but bettering the 0.1% contraction analysts had predicted.

Economists have reacted positively to the print and believe it could mean the Bank of England heads to the interest rate meeting next Thursday with brighter optimism for the economy's near-term future.

Meanwhile, in company news, L&G unveiled it will combine its housebuilding and green energy investment arms into its wider £1.2 trillion investment arm, reducing its divisions from four to three.

Legal & General Capital, the alternative investment manager which focuses on infrastructure and building homes, will merge with the wider Legal & General Investment Management, newly appointed chief executive Antonio Simoes said.

Shares in the finance giant slipped more than 3% in reaction to the decision.

8.05am: GDP growth to outperform BoE's forecasts, says economists

Economists believe second-quarter growth will be better than the Bank of England has predicted, potentially offering some good news in regards to interest rate decisions and how GDP will influence them.

Deutsche Bank (ETR:DBKGn) chief UK economist Sanjay Raja said the bank expected growth in the months from April to June to experience growth between 0.3% and 0.4%, better than the BoE's esitmates of 0.2%.

Raja said: "The flat April print will likely be temporary. And moreover, we continue to see GDP maintaining its upward momentum through the rest of the year.

"To be sure, a cyclical recovery is underway. A firming in real disposable incomes will likely give way to firming household consumption. An early election will give way to more fiscal certainty with some fiscal easing inevitable following the general election."

Luke Bartholomew at Abrdn warned that monthly GDP figures can offer fail to paint a clear picture and that it is “important not to put too much stead in just one month of data and look at the broader trend across several months”.

7.49am: GDP flat; pushed lower by drops in construction and industrial output

The British economy saw its weakest performance in four months in April, as both industrial output and construction suffered falls, despite the service industry having grown in the period.

Production output dropped by 0.9% in the month, down from a growth of 0.2% in March, with manufacturing as the key driving force after it suffered a 1.4% decline.

Construction output shrank by 1.4% in what was its third consecutive monthly fall but was helped slightly by services rising by 0.2%, marking the fourth straight month of rises

Pharmaceutical products and preparations slumped by 6.1%, while food products, beverages and tobacco dropped by 2.3%.

Meanwhile, output of water supply, sewerage and waste management rose by 1.3%, outperforming the mining sector which rose by 0.8% and the electricity, gas, steam and air conditioning output which grew by 0.5%.

George Lagarias, chief economist at Mazars, said: "British GDP was flat in April, but still came in slightly ahead of expectations.

"April’s dismal retail sales had prepared investors for a slowdown, so the number didn’t come as any sort of surprise.

"Going forward, however, we remain positive."

7.36am: FTSE 100 to open higher

London stocks are set to start the higher up by around 50 points with the FTSE 100 at 8190 this Wednesday as the markets react to GDP figures.

The economy stagnated in April, just months after being confirmed it had exited a recession, figures today revealed.

GDP for the month came in at 0%, the ONS said, down from growth of 0.4% in March, but an improvement on the 0.1% contraction analysts had been expecting.

Asian markets lifted higher overnight, helped by a rising technology sector, with the broadest index, barring Japanese shares, rising by around 0.3%, while Japan’s Nikkei dropped 0.5%

Later today in the US, economists will react to the Federal Reserve’s decision on interest rates and the latest inflation print in the States.

Read more on Proactive Investors UK


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