Afternoon summary
Time for a quick recap
Europe’s stock markets are rallying, after Ukraine’s forces made rapid gains against Russia in the north east of the country. The Stoxx 600 index of European countries has now gained 1.5%, to the highest level since the end of August.
News that Ukrainian forces had advanced rapidly in Kharkiv province have lifted the euro and the pound too.
Gas prices have dropped, on optimism that Ukraine’s successes could lead to an easing of the energy crisis.
STOXX 600 AT HIGHEST LEVEL SINCE AUG. 30, LAST UP 1.5%
— Breaking Market News (@breakingmkts) September 12, 2022
The UK economy has returned to growth, partly thanks to the economic lift from hosting the Women’s Euros and the Commonwealth Games.
GDP increased by 0.2% in July, compared with June when the Jubilee bank holidays weighed on activity. The service sector led the recovery, while industrial production and construction output both fell.
UK GDP grew 0.2% MoM in Jul after a -0.6% MoM decline in Jun. Services grew 0.4% MoM after a decline last month while production fell -0.3% MoM and construction fell -0.8% MoM. Consumer-facing services grew 0.6% MoM. #uk #GDP (@ONS) https://t.co/EG2limFWbu pic.twitter.com/vUHegBshnw
— MTS Insights (@MTSInsights) September 12, 2022
Worryingly, the economy stagnated over the last quarter, the Office for National Statistics reported. Several economists warned that the UK could fall into recession this quarter.
Craig Erlam, senior market analyst at OANDA, says UK growth “continued to struggle”
The UK economy grew slightly less than expected in July, with growth supported by consumer-facing services on the back of the Women’s EUROs and the Commonwealth Games.
With the additional bank holiday this month, the economy could be facing a small technical recession, albeit one that won’t be nearly as bad as was expected prior to the cap on energy bills.
There’s a lot more data to come this week which should show consumer spending slipping as inflation remains above 10% and the labour market still strong.
In other news….Britain’s biggest housebuilders privately lobbied for the government to ditch rules requiring electric car chargers to be installed in every new home in England, documents have revealed.
The FTSE 100 construction firms Barratt Developments, Berkeley Group and Taylor Wimpey were among the companies who argued against the policy in responses to an official consultation seen by the Guardian.
The “blatant lobbying efforts” were criticised by Transport & Environment, a campaign group.
Britons must develop a spirit of “radical generosity” to prevent lives being lost because of soaring gas and electricity bills this winter, the head of the World Energy Council (WEC) has warned.
Mourners hoping to travel to London to pay their respects to the Queen are being told to prepare for “unprecedented” demand on transport and in stations, with hundreds of thousands expected to make the trip.
London Underground services have suffered severe disruption on Monday morning due to “power supply problems”, Transport for London (TfL) said.
And the UK government contractor Serco has announced the planned retirement next year of its chief executive, Rupert Soames, who said “it is now time for me to outsource myself” after leading the controversial company since early 2014.
In New York, stocks have opened higher as the rally in Europe feeds through to Wall Street.
The S&P 500 index of US shares has gained 0.7%, or 28 points, in early trading to 4,095 points.
There are similer gains on the tech-focused Nasdaq, and the Dow Jones industrial average of 30 large companies.
DOW JONES UP 128.01 POINTS, OR 0.40 PERCENT, AT 32,279.72 AFTER MARKET OPEN
— Breaking Market News (@breakingmkts) September 12, 2022
S&P 500 UP 22.76 POINTS, OR 0.56 PERCENT, AT 4,090.12 AFTER MARKET OPEN
NASDAQ UP 58.86 POINTS, OR 0.49 PERCENT, AT 12,171.17 AFTER MARKET OPEN
Ukraine’s military progress, and hopes that the US inflation rate could fall tomorrow, perhaps to 8% per year from 8.5% in July, are lifting stocks.
Fiona Cincotta, senior financial markets analyst at City Index, explains:
Another falling inflation print could suggest the start of a trend. While the Fed is still likely to hike rates by 75 basis points in September, it could adopt a less hawkish stance after. This optimism is being reflected in an increased demand for stocks, pushing the indices high and a falling USD.
The upbeat mood is being helped as well by advances by Ukraine in the war. Suddenly investors are opening their eyes to the possibility of a sooner end to the war.
