The FTSE 100 (^FTSE) and European stocks continued their positive run on Friday as the UK economy grew by a better-than-expected 0.6% between January and March.
According to the Office for National Statistics (ONS), services output was up by an estimated 0.7%, while production output grew 0.8%. Meanwhile, construction was down 0.9%.
This rise in GDP means that the economy is no longer in a technical recession, after activity fell in the third and fourth quarters of last year.
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London’s benchmark index was 0.6% higher in early trade, jumping passed the 8400 point mark for the first time
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Germany’s DAX (^GDAXI) rose 0.6% and the CAC (^FCHI) in Paris headed 0.5% into the green
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The pan-European STOXX 600 (^STOXX) was up 0.6%
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Wall Street is set to open higher as S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all in the green
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The pound was marginally higher against the dollar (GBPUSD=X) at 1.2531
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “The 0.6% growth registered in the first three months of the year was higher than forecast, with the green shoots seen in January and February flowering into a stronger growth spurt in March.
!Confidence breeds more optimism, and with the economy showing signs of repairing and the FTSE 100 rallying higher, the glass half full sentiment is settling in. The blue-chip index has powered higher in early trade and set fresh records, after a sheen of positivity has descended on the UK.”
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British Airways owner hails strong quarter
File photo dated 09/10/19 of British Airways planes at Heathrow Airport. The owner of airlines British Airways and Aer Lingus has said its earnings have soared in recent months thanks to higher sales, lower fuel costs and stronger demand across its airlines. It reported an operating profit for the first three months of the year of 68 million euro (£58.5 million), up from the nine million euro (£7.7 million) reported this time last year. Issue date: Friday May 10, 2024. (Steve Parsons, PA Images) International Consolidated Airlines Group (IAG.L), owner of airlines British Airways and Aer Lingus, has said its earnings have soared in recent months thanks to higher sales, lower fuel costs and stronger demand.
It reported an operating profit for the first three months of the year of €68m (£58.5m), up from €9m last year.
It was boosted by increased demand over the Easter holiday and added that it was seeing strong summer bookings.
“Our transformation initiatives and increased demand, including over the Easter holidays, have delivered another very good set of results with improvement to both revenue and operating profit,” Luis Gallego, chief executive, said in a statement.
He added that IAG’s exposure to the Middle East was very small so it hadn’t seen a big impact from the conflict there.
Shares were 1.1% higher on the back of the news.
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UK construction sector remains weak
File photo dated 24/07/23 of a construction worker on a building site near South Bank, London. The UK’s construction sector contracted heavily last month as the housebuilding sector had one of its worst months since 2009, an influential survey has suggested. Companies said that projects to build homes were being cut back as demand weakens and the cost of borrowing rises. Issue date: Thursday October 5, 2023. (James Manning, PA Images) Construction output in Britain fell by 0.9% in January to March period, for the second quarter in a row. This means construction is in recession.
Output is 0.7% lower than the same quarter a year ago, the ONS said on Friday.
The fall reflects a decline in new work of 1.8% driven by private commercial new work, which fell by 5.3%.
However, repair and maintenance increased 0.3% due to housing associations re-directing their budgets towards repairs and upgrading “to deal with problems such as damp arising from tenants using less heating because of the higher cost of living”.
Wet weather also dampened construction activity, as storms kept workers off building sites.
Nicholas Hyett, investment manager at Wealth Club, said:
“Construction remains the one area of weakness, particularly in the commercial sector. That’s no surprise.
“Real estate is particularly exposed to the effect of higher interest rates, and the upheaval of the pandemic is still rocking the office and retail sector – with increased home working and online shopping permanently changing demand. That’s not a trend that’s unique to the UK.”
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Will Biden’s new China tariffs spark market volatility?
President Joe Biden speaks during an event to celebrate the 2023 WNBA champion Las Vegas Aces, in the East Room of the White House, Thursday, May 9, 2024, in Washington. (AP Photo/Evan Vucci) (Evan Vucci, Associated Press) Joe Biden’s reported fresh China tariffs may trigger short-term market volatility, Nigel Green at deVere Group has warned.
It comes as Bloomberg first announced that the US president is set to announce new tariffs on China as soon as next Tuesday, targeting strategic sectors including electric vehicles, semiconductors and solar equipment, according to two people familiar with the matter.
Existing levies are expected to also be maintained.
Green said:
“The imposition of tariffs on these critical sectors signals a potential disruption to global supply chains.
“Companies heavily reliant on imports from China for components like batteries and solar cells are likely to face increased costs, impacting their profit margins.
“This uncertainty can be expected to lead to a knee-jerk sell-off in stocks of companies directly involved in these industries, such as green-tech, as investors seek to mitigate risk.”
The news builds on the President’s calls last month to extend tariffs on Chinese steel and aluminium.
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