Market Report: Growth surprises, Asia rises
Steve Clayton, head of equity funds, Hargreaves Lansdown: “There is no great spurt of growth for the FTSE in early trade, despite GDP data showing the UK economy continued its recovery in the second quarter. Asian markets advanced overnight after economic data releases showed Japanese GDP grew by a stronger than expected 0.8% in the second quarter of the year. That helped the Nikkei 225 index to make further advances after the dramatic falls of last week. The index rose 0.8% overnight, with the strength spilling over into Australian and Korean markets, which added 0.2% and 0.9% respectively. In China, investors chose to focus on strength in retail sales, which rose by 2.7% in July versus last year, rather than the fact that industrial production growth, at 5.1% was slightly behind market projections. China’s real estate swoon continues, with real estate investment levels falling by 10.2%, a small deterioration in an already depressed trend. Overall, the Shanghai index advanced by 1.0%.
In the UK, GDP growth in the second quarter was 0.6%, even after cold weather and the election’s dampening impact on activity led to zero growth in June. This comes hot on the heels of stronger than expected employment data and a weaker than forecast inflation print in recent days. Services inflation dropped far more than expected last month. That’s happy reading for PM Starmer, but just highlights the Bank of England’s dilemma. Growth is stronger than expected, suggesting the economy may not need rate cuts, but inflation is below trend, suggesting that cuts pose limited risks. Cuts are likely to come along one way or another, but nowhere in a Central Banker’s job description does it say “Make people happy”.
Little movement in the energy and FX markets this morning, with Brent crude futures hovering around the $80 mark and sterling holding its own in the recently regained territory above $1.28.
ITM Power released full year results today that show the business turning a corner, in terms of production discipline and financial efficiency. ITM, which is a leader in the manufacturing of clean hydrogen process machinery, reported a sharp reduction in trading losses and strong growth in its sales pipeline as industrial clients start to deploy green hydrogen as a clean fuel that can help them decarbonise their activities. But delays in customer projects mean that expectations for revenues in the current year are sharply lowered to around half the level expected by the market. From ITM’s perspective, this is purely a deferral, projects are delayed, not scrapped, but it pushes the achievement of break-even further into the future. ITM’s shares are so far taking their lead from the growth in order books, rather than the delay in project deliveries and have opened fractionally lower at 58p.
If you thought this summer was bad, you should try running Accesso Technology. They make ticketing systems that allow operators of attractions, to make their operations more efficient and create new revenue generation opportunities. A combination of weak usage of their systems by clients, as the turnstiles were washed away in the rains and delays to some operators’ new project timetables means that Accesso have warned that revenues for the full year are now seen coming in around $10m below previous guidance. Margins will be impacted by the loss of revenues, despite efforts to reduce costs. The stock opened around 17% lower at 576p.”
