(Alliance News) - The FTSE 100 opened higher on Friday, following several releases from the Office for National Statistics including slower quarterly GDP growth.
Meanwhile in the US, Federal Reserve Chair Jerome Powell indicated that the central bank is not "in a hurry" to cut interest rates further.
"Maybe, the plans have changed after Trump's election on rising inflation risks due to pro-growth policies and tariffs," said Swissquote's Ipek Ozkardeskaya. "And beyond Trump, the inflation data released this week wasn’t that encouraging, either. The US headline inflation rebounded from 2.4% to 2.6% parallel to market expectations, while yesterday's surprised to the upside, with both headline and PPI data printing figures above the market expectations. On top, the initial jobless claims came in lower than expected.
"All in all, the Fed is coming to the realisation that cutting rates hurriedly was not a brilliant idea, and the first thing to do now is to do nothing in December."
In corporate news, Volex reported rising revenue and profit for its latest half, but disclosed that TT Electronics has rejected two takeover approaches.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: opened 0.1% higher at 8,037.97
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Hang Seng: up 0.1% at 19,448.82
Nikkei 225: up 0.3% at 38,642.91
S&P/ASX 200: up 0.7% at 8,285.20
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DJIA: closed down 207.33 points, 0.5%, at 43,750.86
S&P 500: closed down 0.6% to 5,949.17
Nasdaq Composite: closed down 0.6% at 19,107.65
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EUR: down at USD1.0556 (USD1.0576)
GBP: down at USD1.2672 (USD1.2713)
USD: up at JPY155.90 (JPY155.81)
Gold: down at USD2,562.34 per ounce (USD2,576.68)
(Brent): down at USD71.24 a barrel (USD72.43)
(changes since previous London equities close)
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ECONOMICS
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Friday's key economic events still to come:
08:30 EST Canada manufacturing sales
12:30 CET eurozone European Central Bank member of the supervisory board Elizabeth McCaul speaks
16:00 CET eurozone European Central Bank Governor Philip Lane speaks
16:15 CET eurozone European Central Bank executive board member Piero Cipollone speaks
11:00 GMT Ireland trade balance
10:00 CET Italy CPI
11:00 CET Italy trade balance
08:30 EST US New York empire state manufacturing index
08:30 EST US export and import prices
08:30 EST US retail sales
09:15 EST US industrial production
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UK GDP decreased 0.1% in September, underperforming against the FXStreet-cited market consensus which had forecast a 0.2% increase, as had been the case in August, data from the Office for National Statistics showed. In the quarter ended September 30, UK GDP is estimated to have increased 0.1%, slowing from growth of 0.5% in the second quarter and missing the consensus forecast of 0.2%. Year-on-year, UK GDP is expected to have grown 1.0% in the third quarter, up from on-year growth of 0.7% for the second quarter.
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Also on Friday, the ONS reported that the UK showed a GBP3.46 billion total trade deficit for September, compared with August's GBP2.02 deficit. Industrial production decreased 0.5% on-month in September, missing consensus of 0.1% growth and swinging from 0.5% growth in August. On an annual basis, production decreased 1.8% for September compared with a 1.7% on-year decline in August, and surpassing consensus of a 1.2% decrease. Construction output is estimated to have risen 0.8% in the third quarter compared with the second, "solely from an increase in new work" which rose 2.0% on-quarter.
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UK Chancellor Rachel Reeves has told City chiefs she plans to create pension "megafunds" that will "power growth" in the economy and reward British savers. In her first Mansion House speech as chancellor on Thursday, Reeves announced plans for the megafunds which she said could bring in GBP80 billion to invest in businesses and infrastructure. The megafunds will mirror schemes in Australia and Canada, where pension funds take advantage of size to invest in assets that have higher growth potential. She also pledged to rip up financial red tape, arguing that regulatory changes following the 2008 economic crash have "gone too far" as she announced a package of reforms aimed at driving competition across financial services.
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The governor of the Bank of England said the UK must "welcome opportunities to rebuild relations" following Brexit, as he backs the chancellor's plans to boost business investment and growth. "The changing trading relationship with the EU has weighed on the level of potential supply. The impact on trade seems to be more in goods than services, that is not particularly surprising to my mind," Bailey said. On the impact of foreign trade and investment on productivity, Bailey said that he takes "no position on Brexit per se".
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Federal Reserve Chair Jerome Powell supported a gradual approach to lowering interest rates, saying the US central bank does not need to be "in a hurry" given a strong economy and after making progress in lowering inflation. "The economy is not sending any signals that we need to be in a hurry to lower rates," Powell said. "The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully." In a speech in Dallas on Thursday, Powell welcomed the "remarkably good" performance of the world’s largest economy amid "significant progress" in taming inflation. "The recent performance of our economy has been remarkably good, by far the best of any major economy in the world," he said. Powell noted that inflation, as measured by the Fed's favoured inflation gauge, was "running much closer" to the bank's target, but had not reached it just yet. "We are committed to finishing the job.
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China's retail sales last month grew at their fastest clip since the start of the year, official figures showed, an encouraging sign for Beijing as it looks to boost sluggish consumption. Retail sales expanded 4.8% on-year in October, the National Bureau of Statistics said, speeding up from the 3.2% in September. The reading also significantly outperformed the 3.8% forecast in a Bloomberg survey of analysts and represents the best reading since February. Figures also showed the national urban unemployment rate fell slightly to 5% from 5.1% in September. However, industrial production growth edged down to 5.3% in October, the NBS figures showed, from 5.4% the previous month.
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Japan's growth slowed in the third quarter, official data showed, as Prime Minister Shigeru Ishiba seeks to jumpstart the world's fourth-largest economy. One of the fiercest typhoons to hit Japan in decades and a government "megaquake" warning weighed on factory production and other economic activity this summer. That dragged on gross domestic product and the country saw growth of 0.2% between July and September, according to a preliminary reading by the Cabinet Office. The data met market expectations, but marked a slowdown from a revised 0.5% in the previous three months. Industrial production in Japan was higher than expected in September. Output grew 1.6% in September from August, according to the Ministry of Economy, Trade & Industry, beating the initially reported 1.4% rise. Output had fallen 3.3% in August from July. On-year, industrial production fell 2.6% in September, easing from a 4.9% fall in August.
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US President Joe Biden and his Chinese counterpart Xi Jinping arrived in Peru Thursday for an Asia-Pacific summit where they will likely meet for the last time under a cloud of diplomatic uncertainty cast by Donald Trump's election victory. Biden and Xi are due to hold talks Saturday, in what a US administration official said will probably be the last face-to-face between the sitting leaders of the world's largest economies before Trump is sworn in in January. With the Republican president-elect having signalled a confrontational approach to Beijing for his second term, the bilateral meeting will be a closely watched affair.
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BROKER RATING CHANGES
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HSBC raises Aviva to 'buy' - price target 555 pence
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Barclays cuts Whitbread to 'equal weight' (ow) - price target 3,160 (3,850) pence
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Barclays cuts Treatt to 'underweight' (overweight) - price target 480 (600) pence
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COMPANIES - FTSE 100
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Land Securities increased its first-half dividend on-year to 18.6 pence from 18.2p. Pretax profit was GBP243 million, swinging from a GBP193 million loss, although EPRA earnings decreased to GBP186 million from GBP198 million. EPRA earnings per share decreased to 25.0p from 26.7p. LandSec said its operational outperformance continues and noted further occupancy growth, plus positive rental uplifts across its retail and London portfolios. It expects full-year results to be in line with last year's levels, and increased the full-year outlook for EPRA earnings per share. Real estate remains in limited supply with rents increasing, LandSec said, and it expects trends in customer demand to persist for the forseeable future.
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COMPANIES - FTSE 250
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Worldwide Healthcare Trust said its net asset value per share has edged up slightly in the first half year, to 381.5p at September 30 from 381.1p at March 31. Its NAV total return for the period was 0.6%, outperforming a flat return from its benchmark. It also declared an unchanged interim dividend of 0.7p per share. WHT said it believes the fundamentals of healthcare - on which it said investors are re-focusing in the pandemic's aftermath - remain strong, and that its portfolio manager is positive about the outlook for the sector.
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OTHER COMPANIES
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Volex announced that it has made two takeover approaches for TT Electronics, both of which were rejected with TT's board allegedly refusing to engage. The first approach valued each TT share at 129.0p, and the second valued them at 135.5p. Also Friday, Volex reported half-year results. Revenue jumped 30% on-year to USD518.2 million, and pretax profit increased 21% to USD26.5 million. Volex also lifted its interim dividend by 7.1% to 1.5p. It said comparatives are tougher so far in the second half, but trading early in the period has been encouraging, and that it is confident full-year expectations will be met.
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By Emma Curzon, Alliance News reporter
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