🏠 Housing Market Correction?

London markets edged ahead to end a turbulent first quarter, house prices dropped at the fastest rate since the GFC, the UK economy grew modestly higher than estimated last year, competition issues threw a spanner in the works of EMIS’ acquisition and London-listed Dignity hobbles towards a sale.

April 03, 2023

Good morning. In today’s update - London markets edged ahead to end a turbulent first quarter, house prices dropped at the fastest rate since the GFC, the UK economy grew modestly higher than estimated last year, competition issues threw a spanner in the works of EMIS’ acquisition and London-listed Dignity hobbles towards a sale.

Markets

UK equity markets edged further ahead on Friday, boosted by sentiment from a positively revised 2022 GDP print in the UK, along with better-than-expected inflation figures across the pond in the US. The FTSE 100 and FTSE 250 closed up +0.2% and +0.1% respectively.

Airlines were a notable mover on the day, with EasyJet (+3.5%), Wizz Air (+3.5%) and British Airways’ owner IAG (+1.6%) all enjoying broker upgrades as analysts predicted a continued resurgence of travel demand this summer.

Top Stories

🏠 Steepest house price decline since GFC

For all the talk of a resurgence in the housing market, data from Nationwide released on Friday painted a starkly different picture. House prices dipped 0.8% between February and March (equating to a 3.1% annual decrease), marking the biggest yearly fall since the financial crisis. Nationwide’s Chief Economist believes it will be “hard for the market to regain momentum” as household incomes continue to be squeezed and consumer confidence remains low.

📊 UK economy soldiers on

Official GDP figures reported by the ONS on Friday showed the UK economy performed (very) slightly better than initially thought, rising 0.1% in the final quarter of the year compared to estimates of flat growth. The uptick is reportedly due to stronger performance in the telecommunications, construction and manufacturing sectors, with household finances also holding steady due to government energy support. The revision moves us further away from the risk of a technical recession (two quarters of contraction), however the UK still remains the only G7 economy yet to return to pre-pandemic levels.

⛔ CMA casts doubt over £1.2bn acquisition of EMIS

The London-listed healthcare firm had a major CMA-shaped roadblock thrown in front of their sale to UnitedHealth on Friday. The UK’s Competition and Markets Authority announced they would be referring the deal to a Phase 2 investigation, as they were unhappy with the remedy proposals offered to mitigate the competitive impact of the deal. These initial proposals included UnitedHealth disposing part of Optum UK (one of their UK-based subsidiaries). Phase 2 investigations are lengthy, taking a minimum of 24 weeks (and a lot of lawyer leg work).

⚰️ Dignity PLC limps towards sale

The listed funeral business announced a 68% drop in operating profits for 2022, citing a number of headwinds including a consumer shift towards lower-priced funerals and increased cost pressures. Dignity also warned that it was currently unable to fund strategic capital expenditures or invest in marketing, due to cash flow generation pressures. The company is in the final stages of a £281m acquisition by a consortium, and is now awaiting closing conditions including FCA change of control approval and shareholder acceptances. (Official)

What Else Happened?

Economics / Politics / General

The UK became the first nation to join Asia Pacific trade partnership CPTPP, in the largest trade deal struck since Brexit.

UK commercial property saw a slight easing in Q1 as deal volumes picked up from the previous quarter’s record low. However - activity still remained at half of the 10-year average.

Deals

An investment vehicle formed by LoveFilm founder Simon Franks is reportedly mulling a bid to save ailing organic supermarket Planet Organic.

BioCorteX - a london-based biotech developing AI tools to simulate bacteria interactions - raised $5m in seed funding.

Company News / Trading Updates

Listed cybersecurity firm NCC Group saw shares plunge 33% on Friday as it warned investors that profits were going to be 30-40% lower than previously forecasted, due to “market volatility”. NCC specifically called out issues relating to the US tech slowdown, banking turmoil and interest rate rises. (Official)

🌎 Global Snapshot

In a move likely to anger Washington, OPEC+ members announced a surprise cut of 1.2m barrels per day (on top of previously agreed cuts) in order to “support market stability”.

A US inflation measure closely watched by the Fed rose less than expected for February; core PCE (tracking consumer spending) rose 0.3% compared to estimates of a 0.4% increase.

Staying on the subject of inflation - Eurozone price increases slowed sharply in March after a drop in energy prices - headline inflation for countries using the Euro fell to 6.9% in March, down from 8.5% in February

UBS are reportedly planning to cut between 20-30% of Credit Suisse staff, with 3,000 jobs at risk in London alone

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