• FTSE 100 falls back to opening levels
• Quarter four GDP revised upwards, house prices fall
• Citi upgrades US equities, lowers Europe

9.28am: Business confidence at 10-month high

Business confidence has risen to its highest level in ten months as companies become increasingly optimistic about filling staff shortages, according to the latest Lloyds Bank Business barometer.

An easing of wage demands from last year’s highs boosted optimism among business leaders that they will be able to recruit staff, according to the survey which covers 1,200 companies with an annual turnover of more than £250,000.

Optimism about the economy improved by 11 points to 23% while trading prospects Rose 4 points to 52%. The net balance for the latter rose by its biggest margin in two years.

Wage expectations rose in March, with 26% of businesses expecting to hike pay by 3% or more, up from 23% the previous month. The share of businesses that expect pay growth of 2% or more rose for the second month in a row to 45%.

However, there are signs that the rate of wage growth is slowing down. Anticipated staffing levels rose for a fourth consecutive month, while the share of businesses planning to increase their prices further fell to a six-month low.

Sophie Lund-Yates at Hargreaves Lansdown noted: “There’s a growing belief that businesses are able to recruit staff, which helps keep a ceiling on the wages that need to be offered to fill vacancies. That said, wages are still expected to climb, it’s simply that the rate of growth is anticipated to come off the boil.”

FTSE 100 still hovering around opening levels, up 5 points.

9.05am: Citi upgrades US equities, lowers Europe

Citi has upgraded its weighting on US equities to overweight in its latest quarterly review but expects global equities to remain range-bound for the rest of the year.

The bank noted stress in the banking sector has reminded the market of the consequences of monetary tightening.

As a result Citi think investors’ attention will increasingly shift from risks of higher rates to risks of recession which should catalyse a change in market leadership, with defensives and high-quality sectors/regions continuing to outperform.

“We thus upgrade the US to overweight along with the global Tech sector,” the broker said.

Citi is less keen on Europe and global financials, both downgraded to neutral, given their cyclical nature.

The broker reckons further downgrades to consensus EPS forecasts remain likely. “Top-down, we expect a 5% EPS contraction,” it said.

“Global equities should remain range-bound to year-end, with volatility set to continue in the near term before an eventual rebound in the back half of this year,” Citi added.

The FTSE has slipped back to parity now with the Dax in Frankfurt and the Cac 40 in Paris also little changed.

There is a raft of inflation data coming out today in the Eurozone and the US and French inflation numbers have come in first.

Inflation across the channel fell sharply in March due a steep drop in energy costs, despite an acceleration in prices of food, tobacco and manufactured goods.

Harmonised French consumer prices rose year-on-year by 6.6%, down from 7.3% in February, but slightly more than estimated by economists who expected a decline to 6.5%.

The main driver behind the easing was a drop in energy inflation from 14.1% in February to 4.9% in March, according to Insee, the national statistics agency. However, food inflation accelerated to 15.8% and manufactured goods inflation rose to 4.8%.

8.35am: Ocado rises after legal win

Shares in Ocado Group PLC (LSE:OCDO) rose 4% in early exchanges after it said had “comprehensively won” the patent infringement suit brought by AutoStore.

The UK High Court ruled that the Autostore patents were invalid and, in any event, Ocado did not infringe them.

Autostore had originally asserted six patents against Ocado in October 2020.  Of these six patents, two were invalidated by the European Patent Office before judgment was handed down, two were withdrawn by Autostore shortly before the hearing started and the remaining two patents were invalidated on Thursday,

The decision follows Ocado’s victory over AutoStore in the International Trade Commission in the USA last year.  Ocado’s claims against AutoStore for infringing Ocado’s IP are continuing in Germany and New Hampshire, USA.

8.20am: FTSE continues good run

FTSE 100 pushed higher in early exchanges despite a mixed bag of news on the health of the UK economy.

At 8.15am London’s lead index was at 7,637.87, up 17.44 points, or 0.23% while the FTSE 250 edged higher to 18,927.44, up 19.70 points, or 0.10%.

The differing economic news included UK GDP being revised up marginally, an upbeat business survey from Lloyds Bank but data showing falling house prices from Nationwide.

Quarter four GDP figures showed the UK narrowly avoided recession with economic growth revised upwards slightly to 0.1% from zero before, according to figures from the Office for National Statistics.

But as Gabriella Dickens at Pantheon Macroeconomics noted the UK is still is the only G7 economy in which GDP has not recovered yet to its level in quarter four 2019, before the pandemic struck.

“Indeed, GDP still was 0.6% lower than it was three years ago in the UK, whereas it was 5.1% higher in the US, 2.9% higher in Canada, 0.8% in Japan, 1.2% in France, 1.9% in Italy and just back in line in Germany,” she added.

She reckons the economy likely will continue to flatline in the first half of this year.

But there was gloomier news on house prices which are falling at the fastest annual rate since the aftermath of the financial crisis, according to Nationwide.

Sarah Coles, head of personal finance at Hargreaves Lansdown noted the “house price slip has become a slump, with the biggest annual price drop in 14 years. The pace of descent accelerated, and we’re already almost 5% below the peak in August. Unfortunately, the indications for the future aren’t looking terribly promising either.”

“Buyers have been broken by rampant inflation, jacked-up mortgage rates, a stagnating economy, and the threat that there could be worse to come. RICS figures for February showed that buyer demand fell again – for the tenth consecutive month. Buyer enthusiasm is likely to have been dampened even further by the fact the gradual fall in mortgage rates stalled in March,” she noted.

Shares in Ocado Group PLC (LSE:OCDO) rose 4.4% after another legal win in a patent dispute against AutoStore AS. The UK High Court verdict concerned two patents. Autostore back in October 2020 had claimed online grocer and warehouse technology firm Ocado infringed on six of its patents, though two of those claims were invalidated by the European Patent Office before a judgment was made. Another two were withdrawn by Autostore before a hearing started. The remaining two patents were invalidated by a judge in Thursday’s verdict.

News of a new CFO ar Rolls-Royce Holdings PLC (LSE:RR.) was welcomed by the market with shares marked 1.3% higher while shares in Spire Healthcare Group Plc (LSE:SPI) firmed 2.8% after Jefferies upgraded the stock to buy with a 250p price target.

But NCC Group PLC (LSE:NCC) tumbled 48% after warning annual profit will be lower than previously expected.

Mike Maddison, Chief Executive commented: “Macro-economic headwinds, market volatility and uncertainty are undermining business confidence, particularly in the technology sector where we are well represented, and as a result we are seeing demand fall in the form of projects being further delayed, reduced or cancelled.”

7.52am: UK house price fall at fastest rate since 2009 – Nationwide

UK house prices are falling at the fastest annual rate since the aftermath of the financial crisis, new figures from Nationwide showed.

The building society reported that UK house prices fell for the seventh month running in March, as the aftermath from the disastrous mini-budget continued to hammer the housing market.

This month, they fell by 3.1% compared to a year ago, which is the largest annual decline since July 2009. Economists had forecast a 2.2% decline.

Across the UK, prices fell by 0.8% month on month, leaving the average UK house price at £257,122.

All regions of the UK saw a slowing in price growth in Q1, with most seeing small year-on-year falls. West Midlands was the strongest performing region, while Scotland remained the weakest.

Robert Gardner, Nationwide’s chief economist, commented: “March saw a further decline in annual house price growth, with prices down 3.1% compared with the same month last year. March also saw a further monthly price fall (-0.8%) – the seventh in a row – which leaves prices 4.6% below their August peak (after taking account of seasonal effects).”

“The housing market reached a turning point last year as a result of the financial market turbulence which followed the mini-Budget. Since then, activity has remained subdued – the number of mortgages approved for house purchase remained weak at 43,500 cases in February, almost 40% below the level prevailing a year ago.”

7.22am: Rolls-Royce names BP exec as new CFO

Rolls-Royce Holdings PLC (LSE:RR.) has rejigged its leadership team as new boss Tufan Erginbilgic continues his transformation of the engineering company.

The headline news is a new CFO with Helen McCabe joining later this year from BP where she is currently senior vice president, Finance for the Customer & Products division running a business with reported EBITDA of US$13.7bn last year.

She also holds accountabilities for BP’s global refining portfolio. 

Erginbilgic, also a former BP exec, said: “I have experienced her abilities first-hand and her skillset will complement the existing capabilities of the Executive Team.”

Panos Kakoullis will remain as CFO until at least 31 August 2023.

The company also appointed Rob Watson as head of its important civil aerospace business with immediate effect, while Adam Riddle becomes the new head of its defence business, and chair and chief executive of Rolls-Royce North America.

7.13am: UK economy grows 0.1% in Q4

The UK economy grew marginally in quarter four according to figures from the Office for National Statistics.

Gross domestic product (GDP) is estimated to have increased by 0.1% between October and December, revised from a first estimate of no growth.

In output terms, the services sector grew by 0.1% and the construction sector grew by 1.3%, while the production sector growth was flat in quarter 4 2022.

The level of real GDP in quarter 4 is now estimated to be 0.6% below where it was pre-coronavirus (COVID-19) at quarter 4 2019, revised upwards from the previous estimate of 0.8% below.

The GDP implied deflator rose by an upwardly revised 7.3% in the year to Quarter 4 2022, primarily reflecting higher cost pressures faced by households.

The household saving ratio increased to 9.3% in Quarter 4 2022, from 8.9% in the previous quarter.

Real households’ disposable income (RHDI) increased by 1.3% this quarter after four consecutive quarters of negative growth.

7.00am: FTSE 100 seen flat

The FTSE 100 is expected to open flat on Friday ahead of a key US inflation report later today.

Michael Hewson at CMC said: “As we bring down the curtain on Q3 we also have the latest US core PCE inflation numbers for February, and here the Federal Reserve will be hoping that there are signs that inflation is cooling here as well after the surprise spike to 4.7% in the January numbers, which prompted a sharp spike in US rate hike expectations just prior to the meltdown that we saw at the beginning of this month.”

“The jump higher in PCE core deflator also happened to coincide with a surge in January personal spending, which rose 1.8%.”

Ahead of that Friday’s economic calendar has a eurozone inflation reading, UK GDP data and a house price index reading from mortgage lender Nationwide.

In the US stocks made further progress on Thursday.

The Dow Jones Industrial Average jumped 141.43 points, or 0.4%, at 32,859.03. The S&P 500 gained 23.02 points, or 0.6%, at 4,050.83 and the Nasdaq Composite climbed 87.24 points, 0.7%, to 12,013.47.

In Asia on Friday, the Nikkei 225 index in Tokyo was up 1.0%. the Shanghai Composite firmed 0.3% and the Hang Seng index in Hong Kong gained 0.6%.

Back in London and the early focus will be results from Computacenter while Mothercare is set to release a trading statement.