UK GDP due after more bullish BoE forecast

(Alliance News) - London's FTSE 100 is called to open higher on Friday ahead of key UK gross domestic product data for the first quarter, reported just a day after the Bank of England wiped away its recession forecast.

IG says futures indicate the index of London large-caps to open 26.0 points, or 0.3%, higher at 7,756.58 on Friday. The FTSE 100 closed down 10.75 points, 0.1%, at 7,730.58 on Thursday. So far this week, the blue-chip index has lost 0.6%.

A quarter-point hike from the BoE, which was expected, takes the UK bank rate to 4.50% from 4.25%. It is the BoE's twelfth successive rate hike. The bank rate stood at 0.10% prior to the current hiking cycle.

Notably, the central bank now expects gross domestic product to flat-line over the first two quarters of the year, having previously predicted a decline. It no longer predicts a UK recession this year.

"Given their track record with respect to financial forecasting, let's hope the Bank of England is correct in this specific forecast. We don't have long to wait to see if they are right when it comes to Q1 GDP, with today's release of the first iteration of Q1 GDP, after the surprise upgrade to Q4 that saw the UK economy eke out growth of 0.1% [quarter-on-quarter], and confounding the expectation of a technical recession," CMC Markets analyst Michael Hewson commented.

"The first 3 months of this year have seen the economy perform much better than even the most optimistic of forecasts, leaving lots of egg on the faces of those who were predicting all manner of disasters during the twilight weeks of last year."

According to FXStreet-cited market consensus, UK GDP is expected to once again expand by 0.1% quarter-on-quarter during the first three months of 2023.

Alongside the GDP reading are UK trade and industrial production data.

The pound fetched USD1.2525 early Friday, up from USD1.2514 late Thursday. The euro climbed to USD1.0928 from USD1.0917, while against the yen, the dollar rose to JPY134.65 from JPY134.33.

In addition to the UK data, Friday's economic diary in the US has the Michigan consumer sentiment reading at 1500 BST.

A barrel of Brent fell by a dollar to USD74.59 a barrel early Friday from USD75.61 at the time of the London equities close on Thursday. Gold traded at USD2,011.73 an ounce, down from USD2,019.26.

SPI Asset Management analyst Stephen Innes said oil prices fell on US banking sector worries, in light of lender PacWest Bancorp once again suffering selling pressure. The stock tumbled 23% in New York on Thursday.

"Oil prices fell as algorithmic selling picked up around the macro-financial driven selloff, as has been so often since early March," Innes said.

PacWest said it lost 9.5% of its deposits last week. It reported customers had "fears of the safety of their deposits".

The wider market in New York ended largely lower, but did perk up towards the end of Thursday's session. The Dow Jones Industrial Average ended down 0.7% and the S&P 500 down 0.2%, though the Nasdaq Composite rose 0.2%.

Stocks in Asia were mixed on Friday. The Nikkei 225 in Tokyo was up 0.9% in late dealings, while the S&P/ASX 200 in Sydney was up 0.1% shortly before the closing bell. The Shanghai Composite was down 0.8%, while the Hang Seng in Hong Kong was 0.4% lower.

In Friday's UK corporate calendar, there are first-quarter results from insurer Beazley and a trading statement from infrastructure construction firm Balfour Beatty.

By Eric Cunha, Alliance News news editor

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