Proactive Investors -
- FTSE 100 lower ahead of busy week of rate calls
- UK economy grew 0.5% in October
- London Stock Exchange jumps on Microsoft tie-up
8.24am: London Stock Exchange rises on Microsoft tie-up
London Stock Exchange Group PLC (LON:LSEG) is in the news after announcing a 10-year partnership with Microsoft Corp (NASDAQ:MSFT). which has taken a stake of around 4% in the UK bourse operator.
The partnership involves next-generation data and analytics, as well as cloud infrastructure solutions, according to a statement by the LSEG.
It involves a new data infrastructure for the London exchange and analytics and modelling solutions with Microsoft Azure, AI, and Microsoft Teams.
“This strategic partnership is a significant milestone on LSEG’s journey towards becoming the leading global financial markets infrastructure and data business, and will transform the experience for our customers,” David Schwimmer, CEO of LSEG, said in the statement.
The move is forecast to increase LSEG's revenue growth meaningfully over time as new products come on-stream although total incremental cash costs over 2023-2025 of £250mln to £300mln will see a 50 to 100 basis points hit to EBITDA margin over the same period.
There is a contractual commitment by LSEG for a minimum cloud-related spend with Microsoft of £2.3bn over the term of the partnership, reflecting minimum cloud consumption expectations and consistent with existing long-term opex and capex plans, the company said.
8.11am: FTSE lower, London Stock Exchange jumps
FTSE 100 opened lower ahead of a busy week of central bank announcements and economic data despite a stronger-than-expected rebound in UK GDP figures in October.
London’s blue chip index is down by 23 points at 7,454 and the FTSE 250 is 81 points lower at 18,835.
The UK economy grew by 0.5% in October, ahead of City expectations of 0.4% growth, but this is unlikely to stop the economy heading into recession in quarter four according to economists.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics said: “We think that GDP will fall by about 0.3% month-to-month in both November and December, leaving it down 0.2% on a quarter-on-quarter basis.”
“Activity indicators from S&P Global, Lloyds (LON:LLOY) and the CBI, as well as the extremely low level of GfK’s consumer confidence index, all are consistent on past form with falling GDP.”
London Stock Exchange Group PLC jumped 4% in early trading as US tech giant Microsoft Corp. has announced a 10-year partnership and took a stake of around 4% in the UK bourse operator.
The partnership involves next-generation data and analytics, as well as cloud infrastructure solutions, according to a statement by the LSEG.
It involves a new data infrastructure for the London exchange and analytics and modelling solutions with Microsoft Azure, AI, and Microsoft Teams.
7.50am: Further signs housing market is slowing
The average asking price of homes being put on the UK market has fallen by 2.1% over the last month, according to Rightmove, which said it had seen the largest pre-Christmas dip of the last four years.
The UK’s biggest property website said the average asking price was £359,137 in early December, down £7,862 from November, and will be seen as further evidence that the property market is on a downward slope.
Last week Halifax said prices in the UK fell by 2.3% in November, the largest monthly drop on its index since the start of the 2008 financial crisis, while at the start of the month, Nationwide said UK house prices were falling at the fastest pace in almost two and a half years.
Despite this, Rightmove said that at the end of 2022, average asking prices were 5.6% higher than at this time a year ago, only slightly below the 6.3% growth recorded in 2021.
However, it predicted a 2% fall in prices next year as a multispeed, hyperlocal market emerges, with “some locations, property types and sectors faring much better than others”.
“After two and a half years of frenetic activity it’s easy to forget that having multiple bidders immediately lining up to buy your home was the exception rather than the norm in pre-pandemic years, and there will be a period of readjustment for home-movers as properties take longer to find the right buyer,” said Rightmove’s Tim Bannister.
“We’re heading towards a more even balance between supply and demand next year, but we don’t expect a surge in forced sales, which would cause a glut of properties for sale and contribute to more significant price falls in 2023,” he added.
7.36am: RyanAir to pay compensation after dropping appeal
RyanAir Holdings PLC will pay out compensation to consumers hit by strike action in 2018 after deciding not to appeal a court ruling made earlier this year according to the UK’s Civil Aviation Authority (CAA).
In January, following action by the CAA against Ryanair (LON:RYA), the Court of Appeal decided that strike action by airline staff was not an 'extraordinary circumstance'.
Ryanair had secured permission to appeal the decision to the Supreme Court but has decided not to pursue this.
Paul Smith, consumer director at the UK Civil Aviation Authority said: "The Civil Aviation Authority undertook enforcement action against Ryanair due to the belief that strike action by airline staff does not constitute an 'extraordinary circumstance' and, as such, affected passengers should be entitled to compensation where this results in the delay or short notice cancellation of their flight.”
“The judgment by the Court of Appeal supported this view.”
“Ryanair's decision to discontinue the Supreme Court appeal of the Court of Appeal judgment means that affected passengers will now be able to make a claim for compensation from Ryanair if they were impacted by strike action taken by Ryanair pilots in 2018 and we would encourage all passengers on flights that were affected to claim the compensation they are entitled to” he said.
At the time of the disruption, passengers whose short-haul flights to or from UK airports were cancelled within 14 days of the departure date were entitled to up to €250 of compensation based on the timings of alternative flights offered.
7.11am: UK GDP rebounds in October
he UK economy grew in October by 0.5% rebounding from a fall of 0.6% in in September 2022, which was affected by the additional bank holiday for the State Funeral of HM Queen Elizabeth II.
The figure was slightly better than City forecasts for a rise of 0.4%.
Looking at the broader picture, GDP fell by 0.3% in the three months to October compared with the three months to July.
GDP grew 0.5% in October, following a fall of 0.6% in September.However, over the last three months as a whole, the economy fell 0.3%.
➡️ https://t.co/lwx4LuzmjP pic.twitter.com/YBmr67b2ln
— Office for National Statistics (ONS) (@ONS) December 12, 2022
The services sector grew by 0.6% in October, after falling by 0.8% in September; the largest contribution to the growth came from wholesale and retail trade; repair of motor vehicles and motorcycles, which rose by 1.9% in the month.
Output in consumer-facing services grew by 1.2% in October, after falls of 1.7% in September and 1.6% in August.
Production remained broadly flat in October, after growth of 0.2% in September; manufacturing was the only sub-sector to contribute positively to production in October, offset by negative contributions from electricity, gas, steam and air conditioning supply, and water supply, sewerage, waste management and remediation activities.
The construction sector grew by 0.8% in October; this is its fourth consecutive increase after growths of 0.4% in September, 0.6% in August and 0.2% in July.
7.00am: Footsie seen lower eyeing central bank moves
FTSE 100 expected to open lower on Monday ahead of a busy week of central bank announcements from the ECB, the Bank of England and the Federal Reserve.
Spread betting companies are calling the lead index down by around 21 points.
US stocks finished the trading week lower on Friday after hotter-than-expected producer price index data for November sparked further Federal Reserve interest rate hike fears.
At the close, the Dow lost 305 points to 33,476, while the S&P 500 eased 29 points at 3,934 and the tech-heavy Nasdaq fell 77 points to 11,005.
“This late Friday slide in the US looks set to weigh on today’s European open” said Michael Hewson chief market analyst at CMC Markets UK.
“We have an absolute avalanche of data announcements this week not only from the US, but also the UK, starting today with the latest monthly GDP numbers for October, as well as industrial and manufacturing production numbers, which are expected to show that the UK economy is in a poor state of health, despite low levels of unemployment” noted Hewson.