London close: Stocks finish firmer after UK GDP miss

by | Nov 11, 2021

London stocks were in the green at the close on Thursday amid a strong performance from the mining sector, as investors digested the latest UK GDP data.
The FTSE 100 ended the session up 0.6% at 7,384.18, and the FTSE 250 was also 0.6% firmer at 23,574.05.

Sterling was in negative territory, meanwhile, last falling 0.14% on the dollar to $1.3386, and slipping 0.05% against the euro to €1.1673.

“The latest UK growth data has done little to help the pound at a time of weakness, with third-quarter growth coming in below estimates at 1.3%,” said IG senior market analyst Joshua Mahony.

“Despite an initial period of outperformance in response to a swift vaccination process, we are now seeing the UK recovery lag behind many of its European peers.

“Nevertheless, while some will be disappointed given expectations that the third quarter would benefit from the removal of restrictions, a big upward revision to the second quarter clearly shows that growth across the six-month period is above market estimates.”

Indeed, those figures released earlier showed UK economic growth slowing in the third quarter amid supply chain issues.

The Office for National Statistics said GDP grew 1.3% between July and September, down from 5.5% in the second quarter and missing expectations for 1.5% growth.

That left quarterly GDP 2.1% below where it was in the last quarter of 2019, before the pandemic hit.

GDP growth for July was revised down from a 0.1% drop to a 0.2% decline, while August’s was revised to 0.2% growth from 0.4%.

On a monthly basis for September, GDP grew 0.6%, which was ahead of the 0.4% increase expected.

“The big point is that the best of the recovery is now behind us,” said Paul Dales, chief UK economist at Capital Economics.

“And we think progress is going to slow over the next six to nine months as shortages remain an issue and the real spending power of businesses and households is reduced by higher taxes and rising utility prices.

“This won’t prevent the Bank [of England] from raising interest rates from 0.1% – perhaps in December – but we think it will contribute to rates going no higher than 0.50% next year.”

Sterling fell to its lowest level against the dollar this year in the wake of those weaker-than-expected economic growth figures.

“The UK’s growth figures are adding to selling pressure on the pound, which has slumped to session lows, extending yesterday’s sharp drop against the US dollar as its downward trendline continues,” said Victoria Scholar, head of investment at Interactive Investor.

“GBP-USD has broken below support at $1.34, falling to levels not seen since last December.

“The pound has been trading in a descending trendline since the highs in May, retracing around a third of its gains since the pandemic-induced trough in March 2020.”

Finally on data, UK house prices were still climbing according to a leading industry survey, supported by a shortage of homes coming to market.

The latest RICS UK residential market survey said a net balance of 70% of respondents reported a rise in prices, with the trend predicted to continue over the next three months and the year ahead.

That compared to an upwardly-revised net balance of 69% in September, and was the first increase in the house price balance since May.

Most economists had been expecting the balance to ease, after stamp duty reverted to its normal level at the end of September, potentially cooling demand.

“Although the mood music around interest rates does appear to be shifting, for now the stronger influence on the housing market is the ongoing imbalance between demand and supply,” said Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors.

“The inventory on agents’ books appears to have slipped back towards historic lows, and this seems to be underpinning both the current price trend and expectations for the next year.”

On the corporate front, investors were wading through a raft of earnings news, with miners among the best performers as copper prices rose.

Anglo American was up 5.87%, BHP added 3.89%, and Rio Tinto advanced 3.42%, while Ferrexpo gained 5.34% as iron ore prices also grew.

Endeavour Mining added 3.45% after it hailed “strong” third-quarter results and said it was on track to beat full-year production guidance, and Centamin and Hochschild Mining were ahead 5.52% and 5.63%, respectively, as the price of gold advanced.

Auto Trader Group rocketed 14.16% after saying it had achieved its highest ever six-monthly revenue and profits following solid performances from both the trade and retail segments.

On the downside, Johnson Matthey tumbled 19.07% after it announced the departure of its chief executive alongside plans to sell its battery materials business and said the trading outlook for the full year was towards the lower end of market expectations.

B&M European Value Retail fell 5.59% after it reported lower half-year earnings but said its supply chain remained “robust”, despite constraints that have plagued the global economy, along with labour shortages in Britain due to Brexit.

Burberry slid 5.36% even after the luxury fashion brand said revenue was now back at pre-Covid levels, and reported a jump in interim pre-tax profit and reinstated its dividend.

Medical property developer Assura lost 2.53% after announcing plans to raise more than £190m, as it looked to bolster its development and acquisition pipeline.

The company also posted results for the six months to 30 September, with pre-tax profits rising 58% to £69.4m, while earnings per share came in at 2.6p, compared to 1.7p a year previously.

EPRA earnings rose 7% to £40.9m.

TI Fluid Systems slumped 10.42% after BC Omega – which is indirectly controlled by investment funds advised by Bain Capital – sold 40m shares in the company in a placing.

Royal Dutch Shell closed 0.52% weaker, as it traded without entitlement to the dividend.

Market Movers

FTSE 100 (UKX) 7,384.18 0.60%
FTSE 250 (MCX) 23,574.05 0.60%
techMARK (TASX) 4,641.68 0.10%

FTSE 100 – Risers

Auto Trader Group (AUTO) 708.60p 14.25%
Anglo American (AAL) 2,901.50p 6.03%
3i Group (III) 1,427.50p 4.54%
Antofagasta (ANTO) 1,484.50p 4.47%
Spirax-Sarco Engineering (SPX) 16,995.00p 4.42%
Polymetal International (POLY) 1,509.00p 4.14%
Glencore (GLEN) 370.00p 4.12%
BHP Group (BHP) 1,975.00p 3.89%
Evraz (EVR) 633.20p 3.77%
Rio Tinto (RIO) 4,597.00p 3.42%

FTSE 100 – Fallers

Johnson Matthey (JMAT) 2,250.00p -18.57%
B&M European Value Retail S.A. (DI) (BME) 608.60p -5.47%
Burberry Group (BRBY) 1,868.50p -5.01%
Associated British Foods (ABF) 2,002.00p -2.72%
International Consolidated Airlines Group SA (CDI) (IAG) 169.16p -2.52%
Flutter Entertainment (CDI) (FLTR) 12,200.00p -2.48%
Next (NXT) 8,086.00p -2.13%
Smith & Nephew (SN.) 1,303.50p -2.03%
Intertek Group (ITRK) 5,078.00p -2.01%
ITV (ITV) 123.45p -1.91%

FTSE 250 – Risers

Centamin (DI) (CEY) 105.35p 5.52%
Ferrexpo (FXPO) 307.80p 5.34%
Hochschild Mining (HOC) 169.70p 4.95%
Fidelity China Special Situations (FCSS) 341.50p 4.43%
Dechra Pharmaceuticals (DPH) 5,020.00p 4.19%
Watches of Switzerland Group (WOSG) 1,302.00p 4.16%
Molten Ventures (GROW) 1,028.00p 4.05%
Endeavour Mining (EDV) 2,100.00p 3.45%
Centrica (CNA) 65.62p 2.85%
Spire Healthcare Group (SPI) 243.00p 2.75%

FTSE 250 – Fallers

TI Fluid Systems (TIFS) 245.00p -10.42%
Trainline (TRN) 305.80p -5.44%
Oxford Instruments (OXIG) 2,150.00p -4.66%
Indivior (INDV) 234.40p -4.56%
TUI AG Reg Shs (DI) (TUI) 233.80p -3.39%
Hammerson (HMSO) 31.78p -3.37%
Assura (AGR) 71.20p -2.53%
Carnival (CCL) 1,577.60p -2.35%
SSP Group (SSPG) 266.80p -2.02%
Aston Martin Lagonda Global Holdings (AML) 1,634.00p -1.86%

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