Index up; Fears of recession loom; Aviva creates Direct Line agreement

• FTSE 100 up 6 points
• Britain’s economy is stagnating
• Aviva maintains the Direct Line takeover

9.57am: Direct Line pushed higher as Aviva’s takeover agreed

Shares in Direct Line Insurance Group PLC (LSE:DLG) rose after Aviva PLC (LSE:AV.) struck a £3.7 billion deal to buy the FTSE 250-listed insurer.

After rejecting an initial advance from Aviva in November, the deal came as a sweetened offer was “simply too compelling to pass up,” noted Hargreaves Lansdown analyst Matt Britzman.

“Direct Line has navigated troubled waters, with its market share steadily eroded and a history of missteps by previous management that left the ship off course,” she said.

“While the new management team has worked to steady the vessel, even they could not deny that Aviva’s offer was the golden ticket that they would struggle to replicate on their own.”

The shares rose 3.1% to reach 250.8p on Monday, but remained below the 275p valuation under Aviva’s offer.

9.33am: FTSE 100 edges higher after worst week for a year

The FTSE 100 moved into positive territory on Monday morning after its worst performance in over a year last week.

London’s blue chip index fell 2.6% during the week, marking the sharpest drop over a five-day period since October 2023.

Wednesday’s hawkish comments from the Federal Reserve about interest rate cuts in the world’s largest economy over the coming year had caused stocks on both sides of the Atlantic to fall sharply.

The Bank of England’s decision to keep interest rates at 4.75% on Thursday did little to move the clock.

Investors appeared in somewhat brighter spirits on Monday, with the FTSE 100 turning green mid-morning, though still up just three points at 8,088.

The lack of significant movement saw Airtel Africa PLC (LSE:AAF) lead the gainers with a 1.9% rise ahead of BAE Systems PLC (LSE:BA.) and AstraZeneca PLC (LSE:AZN).

Entain PLC (LSE:ENT) led decliners of 2.9%, meanwhile, as Schroders PLC (LSE:SDR) and Frasers Group PLC (LSE:FRAS) were also among the decliners.

9.15am: Chancellor Rachel Reeves points to a ‘big’ challenge for the economy

Chancellor Rachel Reeves has set out the scale of the challenge of fixing the economy after revised figures showed gross domestic product (GDP) stalled in the third quarter.

“The challenge we face to fix our economy and properly finance our public finances after 15 years of neglect is enormous,” she said on Monday.

“But this only fuels our fire to deliver to working people.”

The ONS previously reported that GDP growth stalled in the three months to September, as an initial estimate for a rise of 0.1% was scrapped.

Estimated GDP growth in the second quarter was also reduced from 0.5% to 0.4%.

“The Budget and our plan for change will deliver sustainable long-term growth, putting more money in people’s pockets through increased investment and relentless reform,” Reeves added.

8.57am: Fears of the recession are looming as companies expect further decline ahead

Figures showing the UK economy flat in the three months to September have raised eyebrows over the risk of a recession ahead.

According to the ONS, gross domestic product (GDP) failed to grow during the quarter, against an initial estimate of a rise of 0.1%.

Separate figures earlier this month showed the economy unexpectedly contracted in October, leaving fears of negative growth in the final quarter of the year.

The drop has fueled concerns that the UK could be heading for two consecutive quarters of negative economic growth, which would leave it in recession.

A survey by the Confederation of British Industry, also published on Monday, found that private sector businesses expected activity to fall in the three months to March.

Expectations over the coming three months were at a two-year low, with pessimism about output across all sub-sectors recorded.

“The economy is headed for the worst of all worlds,” said CBI Deputy Chief Economist Alpesh Paleja, “companies expect to reduce both production and employment, and expectations for price growth are firming”.

“Businesses continue to cite the impact of measures announced in the Budget – notably the increase in employers’ national insurance contributions – exacerbating an already tepid demand environment.”

However, analysts had highlighted bright spots in Monday’s GDP data, with Pantheon Macro pointing to growing investment and steady consumer spending.

“Looking ahead, we expect GDP growth to pick up to 0.2% quarter-on-quarter in the fourth quarter,” Pantheon said.

“And we expect growth next year to average a healthy 0.4% quarter-on-quarter in 2025.”

8.29: Frasers suggests new candidate for Boohoo board after spat

Frasers Group PLC (LSE:FRAS) has hinted that a new candidate will be proposed to join Boohoo Group PLC’s (AIM:BOO) board after the latter’s shareholders rejected appointments last week.

Frasers noted the result of last Friday’s vote to appoint founder Mike Ashley and restructuring specialist to Boohoo’s board in a statement on Monday.

“Frasers respects the views of the independent shareholders,” it said.

The vote marked the culmination of a row between the two companies after biggest shareholder Frasers targeted Boohoo’s plans for a strategic review and possible sale.

“Frasers notes Boohoo’s invitation to propose a board candidate other than Mr Ashley or Mr Lennon,” it added on Monday.

“We will present a highly qualified candidate in due course and fully expect the Boohoo board to maintain their commitment without hesitation or delay.”

8.20am: Boohoo offloads London office to cut debt

Boohoo Group PLC (AIM:BOO) has sold its London office to further pay down debt, the clothing retailer said on Monday.

Global Holdings UK Ltd bought the Great Pulteney Street, Soho office for £49.5m, Boohoo confirmed in a statement.

Boohoo added that the move to sell “non-core” and “non-strategic” assets would further strengthen its balance sheet, where the company had begun a turnaround earlier this year.

“A portion of the proceeds will be used to repay the full balance of the loan due in August 2025,” Boohoo said.

Boohoo would be left with a £125m revolving credit facility, “sufficient for its needs going forward,” as a result, it added.

8.09am: FTSE 100 drops at open

London’s blue chips fell in early trade on Monday, with the FTSE 100 opening 25 points lower at 8,059.

Relx PLC and Spirax Group PLC led the early fallers, followed by the likes of Persimmon PLC (LSE:PSN) and IMI PLC (LSE:IMI).

Standard Chartered PLC (LSE:STAN) and HSBC Holdings PLC (LSE:HSBA) meanwhile gained in the absence of any major movers.

8.01am: UK economy stalls as growth estimates fall

Revised data showed the UK economy stalled between July and September, growing at a slower pace than previously thought in the previous three months.

Gross domestic product was unchanged in the quarter to September against previously reported 0.1% growth, according to a new estimate from the Office for National Statistics.

Growth between April and June, previously estimated at 0.5%, was meanwhile revised down to 0.4%.

“The economy was weaker in the second and third quarters of this year than our original estimates suggested,” said ONS director of statistics Liz McKeown.

She added that bars and restaurants, law firms and advertising “in particular” performed less well.

“The household savings rate fell slightly in the recent period, but remains relatively high by historical standards,” McKeown continued.

“Meanwhile, household real disposable income per capita showed no growth.”

7.47am: Aviva agrees £3.7bn deal to buy Direct Line

Aviva PLC (LSE:AV.) has agreed to buy rival Direct Line Insurance Group PLC (LSE:DLG) in a £3.7 billion deal.

Direct Line shareholders will receive 0.2867 new Aviva shares, 129.7p in cash and up to 5p in dividends per share. share under the deal, the FTSE 100-listed insurer said on Monday.

Each Direct Line share will be valued at 275p as a result, marking a 73.3% premium to their closing price on November 27, when Aviva first launched its takeover offer.

Direct Line had rejected Aviva’s initial advances before agreeing to a sweetened deal in early December, paving the way for the takeover in mid-2025 subject to shareholder approval… Read more

7.30am: House prices rise as stamp duty deadline looms

In November, house prices edged higher as a looming deadline for stamp duty exemptions pushed up demand, Zoopla has reported.

Year-on-year, prices rose by 1.9% in November to an average of £267,500 as the sales pipeline grew by 30% to 283,000 homes for a total value of £104 billion.

Many buyers rushed to avoid higher stamp duty before the thresholds were dropped from April, Zoopla noted.

This will see stamp duty paid on homes worth £125,000, up from £250,000 previously, with first-time buyers facing a drop in the threshold from £425,000 to £300,000.

The sales pipeline had reached its highest level in four years as a result, as buyers also returned to the market after years of high mortgage rates, Zoopla added.

However, uncertainty about the direction of mortgage interest rates had meant that buyers became more price sensitive, with the sale being agreed at 3.6% below the asking prices.

07.12: The shares are seen on the way up

London’s blue chips looked on course for a gain ahead of the shortened Christmas week.

Futures had the FTSE 100 up 21 points at 8,121 before Monday’s trade, after falling 215 points over the past week.

Asian markets were broadly up overnight, with China’s Shanghai and Shenzhen indexes among the few decliners.

Back in London, attention was early on data from Zoopla showing a 1.9% rise in house prices year-on-year in November to an average of £267,500.

5.00: Monday’s schedule

House price figures from Zoopla and a final estimate for economic growth in the third quarter will be in focus on Monday.

Due notices:

AGMs: Abrdn Diversified Income And Growth PLC, Virgin Wines UK PLC

Economic news: Zoopla house prices (UK), current account (UK), GDP (UK), consumer confidence (US)