The UK economy contracted by an estimated 0.1% in the second quarter, the Office for National Statistics said today.
The decline was driven by a 0.6% fall in June, a performance that reflected the winding down of Covid-19 testing and vaccine programmes and disruption to activity caused by the Jubilee celebrations.
However, City economists had forecast a 1.2% fall in June and contraction of 0.2% for the second quarter.
FTSE 100 Live Friday
Q2 GDP declines 0.1% after 0.6% fall in June
US progress boosts Flutter Entertainment shares
FTSE 100 higher but retail stocks under pressure
Chinese stocks tank after five companies announced they’re pulling out of Wall Street
Friday 12 August 2022 15:16 , Simon Hunt
US-listed shares in Chinese companies tanked today after five China-based companies announced they were withdrawing from the New York Stock Exchange amid escalating tensions between the USA and China.
The state-owned companies, including China Life Insurance and oil firm Sinopec, said they would be keeping lstings in Hong Kong and Shanghai. It comes after US regulators said the firms did not meet American auditing standards and were already in danger of being kicked off Wall Street stock markets.
The Industrial & Commercial Bank of China dropped 4.2% in New York on the news, while PetroChina Company Limited fell 2.9%.
Stocks rise as inflation worries cool: US markets open
Friday 12 August 2022 14:55 , Simon Hunt
Stocks made gains in the opening minutes of trading in New York as investor agitation about rising inflation began to cool.
US inflation data out earlier this week showed prices fell in July compared to June, raising hopes of a smaller interest rate rise when the Federal Reserve meets later this month.
The S&P 500 rose 0.6% while the Nasdaq rose 0.7%, Those gains were a bit more muted than they might have been, as Chinese stocks tanked after five companies announced they would be withdrawing a US listing.
Flutter blasts gambling law delays as bookies lose in UK
Friday 12 August 2022 14:13 , Simon Hunt
Two of the biggest names in UK gambling have revealed the impact of delays to government reform plans for the industry.
Flutter, owner of Paddy Power, hit out at the uncertainty, as measures it has already taken ahead of the legislation coincided with a 4% fall in revenues for its UK and Ireland business. 888, which owns William Hill, reported a 25% decline in UK revenue as it too tightened its policies.
The white paper on the subject was delayed in June due to the Conservative Party’s leadership contest, the fourth postponement since the original 2019 announcement that changes were on the way. The potential measures have been a source of disagreement within the Government ever since.
Flutter’s chief executive Peter Jackson called the delays “disappointing”, pointing out that “we’ve consistently supported” reform and “we hope for clarity as soon as possible — there’s been uncertainty for everyone involved, and we’ve now had more than 18 months of it.
“We hope [the white paper] will be out in Q4,” he said.
Flutter has already changed aspects of its business in anticipation of tighter rules to prevent problem gambling from high-spending customers, including trialling £10 limits on online slot machine stakes and compulsory deposit limits for all customers under the age of 25.
Group revenue at Flutter rose 11% to £3.4 billion. Earnings fell 20% to £476 million. Shares rose 7.8% to 10,165p.
888‘s overall first half profits slumped 66% to £14.4 million, sending its shares down 8% to 148p.
Fresh blow to Peloton from American legal ruling
Friday 12 August 2022 13:42 , Simon Hunt
Beleaguered exercise bike maker Peloton suffered another blow yesterday after a US judge said the firm must face a lawsuit over allegedly misleading customers over the size of its fitness class library.
In 2019, Peloton removed thousands of on-demand classes over licensing issues related to music in the videos.
District Judge Lewis Linman said “there would be value associated with the products that resulted in an increased price when that value was not actually there”.
Peloton shares have dropped 89% in the past year after it suffered a series of setbacks. In February, the business was accused of concealing rust and corrosion on its bikes to avoid product recalls. Peloton said the rust was “superficial” and would not affect the bike’s performance. Sales slumped 24% in the first quarter of 2022
GSK rebuts carcinogenic claim on Zantac as US lawsuits loom
Friday 12 August 2022 13:05 , Simon Hunt
GSK has hit back at claims one of its former drugs could cause cancer as the pharma giant faces a legal threat from thousands of personal injury claims.
GSK vowed to “vigorously defend” all claims relating to Zantac, that was once a popular antacid, snubbing concerns raised as “speculative commentary”.
The company said: “GSK, independent cancer researchers, the FDA, and the European Medicines Agency, have all undertaken extensive reviews of available data and conducted numerous investigations into this issue since 2019.
“GSK, the FDA, and the EMA have all independently concluded that there is no evidence of a causal association between ranitidine therapy and the development of cancer in patients.”
Pharmaceutical stocks GSK, Sanofi and Haleon saw more than $40 billion (£32.9 billion) wiped from their combined market cap this week due to litigation fears around Zantac.
The businesses are defendants in a series of US litigation claims that the heartburn drug, recalled in 2020, could have contained a cancer-causing substance called NDMA. More than 3000 personal injury cases have been filed in federal and state courts. Plaintiffs said the companies had not properly warned them of potential side effects or risk.
Robinhood trading app taken to court for market manipulation
Friday 12 August 2022 11:39 , Simon Hunt
Popular trading app Robinhood is set to face market manipulation claims after it imposed trading restrictions on customers during the so-called “meme stock” rally last year.
Robinhood temporarily suspended purchases of a number of stocks in January 2021 after shares in video game retailer GameStop soared more than 1000% in days. The giant jump in prices proved a major headache for several hedge funds that had bet against the stocks.
District Judge Cecilia Altonaga said the restrictions and comments the company made about the capital it held “evince an intent on the part of Robinhood to artificially depress share prices for its personal benefit”.
Johnson & Johnson halts talcum powder sales in cancer scare
Friday 12 August 2022 11:24 , Simon Hunt
Johnson & Johnson is to halt sales of its leading talc-based baby powder after facing allegations that the product could have contained carcinogenic materials.
The business faces thousands of legal challenges from women who allege the product may have caused them to develop ovarian cancer.
Johnson & Johnson hit back, saying: “We stand firmly behind the decades of independent scientific analysis by medical experts around the world that confirms talc-based Johnson’s baby powder is safe, does not contain asbestos and does not cause cancer.”
A new cornstarch-based version of the product is already widely sold across the US and will now be rolled out globally.
FTSE 100 rallies, Kingfisher falls after downgrade
Friday 12 August 2022 10:19 , Graeme Evans
Retail shares came under more pressure today after a City bank downgraded its recommendations on stocks including Dunelm and B&Q owner Kingfisher.
The softer outlook for DIY spending means UBS now rates Kingfisher at “sell“, with a new target price of 203p representing a 21% downside on last night’s price.
The bank also removed its “buy” stance on homewares retailer Dunelm, having slashed its price estimate from 1761p to 850p. UBS said: “We like the growth story but are cautious near term on weakening industry data.”
DFS Furniture was another casualty after being downgraded to “sell”, but Howden Joinery kept its “buy” status as a “relatively safe bet in a tough environment”.
Kingfisher shares fell 5.3p to 250.5p following the downgrade, while Howden dropped 11.8p to 673.4p. Dunelm weakened 20p to 821p in the FTSE 250 index and DFS eased 5p to 136.2p compared with UBS’s new price target of 100p.
The retail caution came as the FTSE 100 index rose 43.67 points to 7509.58, with BP and Shell up by around 1% after Brent crude returned above $100 a barrel.
Industry prices surged yesterday when the International Energy Agency raised its demand estimate for this year amid a switch from gas to oil for power generation.
The FTSE 250 index was 25.19 points higher at 20,270.62, with shares in travel group TUI up 5.3p to 153.8p.
GDP down 0.1% as recession fears grow
Friday 12 August 2022 09:06 , Graeme Evans
UK output fell by 0.1% in the second quarter, including a drop of 0.6% in June amid one-off factors such as the Jubilee and end of Covid testing programmes.
ING economist James Smith expects monthly GDP to rebound by roughly 0.7% in July and by around half a percent across the third quarter.
He said: “That means discerning the impact of the cost of living squeeze is going to be tricky for the next few months, at least in terms of the GDP figures. But by the fourth quarter, the signs of recession are likely to be more apparent.
“We'll have to wait and see what the new prime minister offers in terms of support, but at the very least a fall in fourth quarter GDP now looks highly likely.”
FTSE 100 higher, GSK up 2%
Friday 12 August 2022 08:55 , Graeme Evans
GSK shares are 2% or 25.8p higher at 1425.8p, having fallen 10% yesterday on fears over potential US litigation relating to heartburn drug Zantac.
The company said today that numerous extensive reviews since 2019 had failed to identify any cancer risk and that it intended to vigorously defend all claims.
GSK’s former consumer healthcare division Haleon, which was also heavily sold yesterday, fell 1p to 264.8p.
The FTSE 100 index rose 24.86 points to 7490.77, with the return of Brent crude to above $100 a barrel causing shares in BP and Shell to lift 1%.
The FTSE 250 index slipped 27.26 points to 20,218.17, led by 888 Holdings after its shares fell 8% or 12.2p to 147.8p in the wake of results.
Flutter shares jump after H1 results
Friday 12 August 2022 08:33 , Graeme Evans
Flutter Entertainment shares have jumped 7% - up 658p to 10,040p - after the gaming company’s half-year results showed continued momentum in the United States, where it is the market leader in online sports betting through FanDuel.
Underlying earnings of £476 million in the first half were 20% lower but in line with expectations as the Paddy Power owner continues to invest in the United States.
Chief executive Peter Jackson said: “The first half of 2022 was positive for the group with significant progress made against the strategic objectives we outlined in March.
“We expanded our recreational customer base by over one million players in the half and increased the proportion of customers using safer gambling tools to over one third.”
The FTSE 100-listed shares have fallen by a third over the last year, although over a three-year period the price remains ahead by more than 40%.
Richard Hunter, head of markets at Interactive Investor, said: “With an international presence bolstered by a soon to be profitable US unit, hopes remain high and the market consensus of the shares as a strong buy incorporates the longer-term view.”
US markets consolidate gains, FTSE 100 steady
Friday 12 August 2022 07:56 , Graeme Evans
An improved outlook for inflation and interest rates continues to benefit US markets after the major indices consolidated their recent gains in trading last night.
The tech-focused Nasdaq is now more than 20% higher than its most recent low point as sentiment improves on hopes of a slowing in the pace of Federal Reserve interest rate rises.
This optimism has been given momentum by July’s softer-than-expected inflation figure and yesterday’s producer price index reading.
The headline measure fell from 11.3% in June to 9.8% in July, helped by a slowdown in the annual increase in energy prices.
The mood in European markets is more tense, given concerns about winter energy supplies and as natural gas futures return to their highest levels since early March.
This led to a lacklustre session for the region’s leading indices yesterday, with the FTSE 100 index down 0.6% amid heavy selling of shares in GSK and Haleon.
CMC Markets expects the FTSE 100 to open unchanged at 7466.