London midday: Stocks rise even as pound rallies on GDP data
London stocks extended gains by midday on Friday even as the pound roared higher on the back of solid UK growth figures, with investors looking ahead to the US GDP release and a speech by Donald Trump at Davos.
The FTSE 100 was up 0.4% to 7,648.02, while the pound was up 0.8% against the dollar to 1.4260 and 0.4% versus the euro at 1.1448 after UK growth in the fourth quarter proved better than expected.
The British economy grew more strongly than expected in the final three months of 2017, official data showed, increasing the chances that the Bank of England could raise interest rates again this year.
Gross domestic product grew 0.5% in the fourth quarter from October to December, compared to the preceding quarter, according to an initial estimate from the Office for National Statistics. This was an improvement from 0.4% in the third quarter and better than the 0.4% the market expected.
Compared to the fourth quarter of 2016, GDP growth slowed to 1.5% from the 1.7% annual growth a quarter earlier, but again this was better than the 1.4% consensus forecast. This meant growth for 2017 as a whole was 1.8%, only slightly lower than the 1.9% in 2016.
Overall industrial production growth slowed from 1.3% to 0.6%, while the construction sector’s recession intensified, with growth falling from -0.5% to -1.0%. This was offset, however, by a pick-up in growth in the more dominant services sector, from 0.4% to 0.6%, which was the strongest quarterly increase in the year.
IG analyst Joshua Mahony said: “This morning’s surprise UK GDP outperformance has provided a boost for the pound, as the Q4 figure of 0.5% allayed fears that recently subdued growth will persist. This is by no means a blockbuster figure, but the recent recovery in services has helped keep fears of an economy in freefall at bay for now. A decline in agriculture and construction were the main drags over the quarter, yet it will almost always come down to the trajectory of services growth, which thankfully has managed to pick up despite Brexit fears.”
Economist Samuel Tombs at Pantheon Macroeconomics added the strong GDP print "increases the chances that the MPC follows up November’s interest rate rise as soon as this summer".
Sterling had already been enjoying solid gains before the data release after Bank of England governor Mark Carney predicted a "re-coupling" between the UK and the booming world economy and defended his gloomy Brexit forecasts.
Carney, along with the European Central Bank’s bond-buying chief Benoit Coeure and Bank of Japan governor Haruhiko Kuroda, will be addressing the World Economic Forum later on Friday.
The BoE boss, speaking on BBC radio, defended his caution on the effects of Brexit, which had seen the bank have to upgrade some of its most gloomy forecasts, pointing to the UK being "a bit of an outlier” in underperforming versus the booming global economy due to a “Brexit effect in the short term” as companies were uncertain about the future.
Still to come on Friday, investors will eye preliminary fourth-quarter GDP figures for the US and a speech by Trump at the World Economic Forum, during which he is expected to outline his ‘America First’ policy.
In corporate news, AstraZeneca rose after saying it found a statistically significant improvement in eight out of nine lung patients as it tested its 'PT010' combination drug delivered with a pressurised metered-dose inhaler in late-stage clinical trials.
Rival GlaxoSmithKline was also on the up after saying that its asthma and chronic obstructive pulmonary disease drug Relvar Ellipta has received a "positive opinion" from EU regulators.
Just Eat was the standout gainer on the FTSE 100 as RBC Capital Markets said in a note in which it considered the most likely potential internet M&A scenarios that the company’s cash reserves and more sophisticated data analytics could benefit Takeaway.com and provide greater firepower to compete with Delivery Hero in Germany.
Spectris reversed earlier losses after announcing the acquisition of Concept Life Sciences from Equistone Partners Europe and company management for £163m, on a debt and cash-free basis and met from existing cash and bank facilities.
On the downside, sports betting and gaming group GVC Holdings slumped as it said it has made a provision of around €200m in its 2017 financial accounts after its Greek subsidiary received a €186.77m tax bill for 2010 and 2011. The company, which pointed out that it was one of a number of online gaming operators that had been hit with a Greek tax bill, said it plans to appeal the assessment. Ladbrokes Coral and Rank Group were also under pressure.
HICL Infrastructure slipped as it updated the market on its operations following the collapse of Carillion earlier in the month, reporting that its priority is the continuation of services to public sector clients and the users of the facilities at the affected PPP projects.
Precious metals miners Fresnillo and Randgold Resources lost their shine as gold and silver prices retreated.
On the broker note front, Goldman Sachs made some changes to its stance on utility and water stocks, upgrading National Grid to ‘neutral’ and initiated covered of Severn Trent, United Utilities and Pennon at ‘sell’ and ‘neutral’, respectively.
Meanwhile, building materials group CRH was lifted to ‘neutral’ by Exane BNP Paribas while WPP was initiated at ‘underperform’ by Bank of America Merrill Lynch.
Market Movers
FTSE 100 (UKX) 7,648.02 0.42%
FTSE 250 (MCX) 20,579.22 0.28%
techMARK (TASX) 3,467.08 0.61%
FTSE 100 - Risers
Just Eat (JE.) 823.40p 2.69%
easyJet (EZJ) 1,684.50p 2.03%
Ashtead Group (AHT) 2,113.00p 1.98%
Standard Chartered (STAN) 848.60p 1.87%
Next (NXT) 5,150.00p 1.70%
Pearson (PSON) 695.60p 1.49%
Bunzl (BNZL) 2,038.00p 1.44%
Kingfisher (KGF) 352.80p 1.41%
Rolls-Royce Holdings (RR.) 855.80p 1.40%
Croda International (CRDA) 4,483.00p 1.38%
FTSE 100 - Fallers
Randgold Resources Ltd. (RRS) 7,130.00p -0.94%
Fresnillo (FRES) 1,360.50p -0.73%
Antofagasta (ANTO) 941.20p -0.72%
Smurfit Kappa Group (SKG) 2,522.00p -0.71%
Rio Tinto (RIO) 3,911.00p -0.67%
Reckitt Benckiser Group (RB.) 6,786.00p -0.62%
WPP (WPP) 1,294.09p -0.57%
Mediclinic International (MDC) 626.20p -0.48%
Associated British Foods (ABF) 2,848.00p -0.45%
BHP Billiton (BLT) 1,561.80p -0.45%
FTSE 250 - Risers
Coats Group (COA) 78.70p 5.78%
McCarthy & Stone (MCS) 149.50p 4.04%
JD Sports Fashion (JD.) 372.40p 3.24%
Kier Group (KIE) 1,137.00p 2.99%
Dechra Pharmaceuticals (DPH) 2,312.00p 2.94%
Serco Group (SRP) 99.00p 2.75%
Ferrexpo (FXPO) 294.80p 2.72%
Purecircle Limited (DI) (PURE) 419.53p 2.70%
William Hill (WMH) 311.30p 2.67%
Ultra Electronics Holdings (ULE) 1,485.00p 2.48%
FTSE 250 - Fallers
HICL Infrastructure Company Ltd (HICL) 140.70p -4.61%
FDM Group (Holdings) (FDM) 946.00p -2.97%
John Laing Infrastructure Fund Ltd (JLIF) 112.09p -2.87%
GVC Holdings (GVC) 925.50p -2.37%
Vedanta Resources (VED) 862.60p -2.31%
Greencore Group (GNC) 208.00p -2.26%
Ocado Group (OCDO) 508.30p -2.06%
Go-Ahead Group (GOG) 1,612.00p -1.89%
Hochschild Mining (HOC) 229.30p -1.80%
International Public Partnerships Ltd. (INPP) 144.64p -1.74%