London close: Stocks mixed as data shows UK GDP growth

London’s markets closed with a mixed performance on Friday, as investors digested the latest GDP data suggesting an end to the recession in the UK.

The FTSE 100 index managed gains of 0.91%, closing at 7,995.58 points, while the FTSE 250 declined 0.33%, ending the day at 19,721.24 points.

In currency markets, sterling was last down 0.8% on the dollar, trading at $1.2453, while it weakened 0.04% against the euro to change hands at €1.1698.

“As the date of a possible Fed rate cut got pushed back from June to September, the US dollar rallied to levels last seen in November,” said IG senior market analyst Axel Rudolph.

“EUR-USD saw its largest weekly loss in 18 months, while GBP-USD fell through key technical support, as USD-JPY traded in 34 year highs.

“Meanwhile global stock indices saw a second consecutive week of losses, the FTSE 100 being the exception, though, and rallying by over 1%.”

Rudolph said the index did so as investors moved out of “overvalued” US into “undervalued” UK stocks amid mixed bank results, as the first-quarter earnings season kicked off on Wall Street, and as the UK economy grew for a second month.

“The gold price made yet another record high, topping the $2,400 per troy ounce mark, amid flight-to-safety flows.

“Meanwhile the oil price rallied by around 2.5% on Middle East concerns.”

UK economy expands slightly in February, inflation slows in Germany

In economic news, the Office for National Statistics reported a modest expansion to the UK economy in February, with GDP increasing by 0.1%.

The growth, albeit slight, followed a 0.3% expansion in the prior month, aligning with market expectations.

January’s figures also received an upward revision, indicating a more robust performance than initially estimated.

The data suggested that the UK economy did not contract in the first quarter of 2024, offering hope that the recession, which saw contractions in the latter half of 2023, may be coming to an end.

“The economy grew slightly in February with widespread growth across manufacturing, particularly in the car sector,” said Liz McKeown, director of economic statistics at the ONS.

“Services also grew a little with public transport and haulage, and telecommunications having strong months.

“Partially offsetting this there were notable falls across construction as the wet weather hampered many building projects.”

Looking across the last three months as a whole, McKeown said the economy grew for the first time since last summer.

Paul Dales, chief UK economist at Capital Economics, said the 0.1% gain in February and the revision to January all but confirmed the recession ended in the fourth quarter.

“But while we expect a better economic recovery than most, we doubt it will be strong enough to prevent inflation – and interest rates – from falling much further as appears to be happening in the US,” he added.

On the continent, Germany saw a decline in inflation during March, marking its lowest level since mid-2021.

According to secondary estimates from Destatis, the harmonised index of consumer prices rose.3% year-on-year, consistent with both preliminary and analyst projections.

The decrease from previous months, with inflation at 2.7% in February and 3.1% in January, reflected a trend towards stabilising prices.

Finally on data, China saw a notable decrease in its trade surplus for March compared to the prior year.

Data from the National Bureau of Statistics indicated a trade surplus of $58.55bn last month, down from $78.43bn in March last year.

That was well below economists’ expectations of $70.2bn, and represented the lowest surplus since October.

Exports dropped 7.5% year-on-year in March, and imports by 1.9%.

Miners in the green, housebuilders in focus

On London’s equity markets, precious metals miner Fresnillo jumped 7.61% as gold prices saw a significant uptick.

Joining the rally were other heavyweight miners such as Antofagasta, Anglo American, Glencore, and Rio Tinto, which posted gains ranging from 2.61% to 5.1%, buoyed by rising copper prices.

Housebuilders also saw notable movements, spurred by positive sentiment following upgrades from prominent brokers.

Barratt Developments, Persimmon, Redrow, and Taylor Wimpey saw increases ranging from 1.3% to 3.34%, following upgrades from JPMorgan Cazenove and RBC Capital Markets.

However, Vistry, Bellway, and Berkeley Group saw slight declines, with the latter two being downgraded by JPM.

“Overall, despite the backdrop of a likely subdued 2024 from an operational perspective, we take a more positive stance on the sector this year, as we see scope for likely positive sentiment [and] newsflow from the upcoming UK election – with housing expected to be a key focus – before positioning for a recovery in 2025, likely aided by rate cuts,” the bank said.

RBC meanwhile said that Taylor Wimpey had “wind behind its sales”.

“Of the housebuilding majors it is the least distracted by management change, strategic change or potential merger and acquisition activity.

“We believe it is reading the weather well – that the weather is improving.

“With all hands on deck it may be the first to react to improving market conditions and the first of the large caps to meet its medium-term goals.”

BP added 3.67% after reports emerged that the United Arab Emirates’ state-owned oil company ADNOC was considering acquiring the oil giant.

Despite initial considerations, the discussions did not progress further due to factors including political considerations, according to sources cited by Reuters.

Elsewhere, Diversified Energy Company rose 1.9% as Brent crude remained above $90 a barrel amid tensions in the Middle East.

Conversely, Petrofac plummeted 20.47% after the company disclosed ongoing discussions with lenders regarding debt restructuring, potentially leading to a significant debt-to-equity conversion.

Airlines were in focus, with easyJet and IAG, the owner of British Airways and Iberia, descending 1.85% and 2.27%, respectively.

Reporting by Josh White for Sharecast.com.

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