(Sharecast News) – European shares opened lower on Wednesday as investors digested news that the UK economy contracted more than expected in July and awaited a key inflation reading from the US.
The pan-European Stoxx 600 index was down 0.44% in early deals with all major regional bourses lower.
The UK economy contracted more than expected in July as strikes and poor weather took their toll, according to figures released on Wednesday by the Office for National Statistics.
GDP shrank 0.5% following 0.5% growth in June, and versus consensus expectations of a 0.2% decline.
Services output fell 0.5% following 0.2% growth in June, and was the main contributor to the fall in GDP in July.
Meanwhile, production output was down 0.7% in July following 1.8% growth the month before, and output in the construction sector declined 0.5% after growth of 1.6% in June.
”This gloomy picture comes in sharp contrast to the more upbeat revision which came through from the ONS at the start of September, which indicated that the economy was significantly larger at the end of 2021 than previous estimated,” said Hargreaves Lansdown analyst Susannah Streeter.
“Although this data doesn’t include those upwards revisions, it’s clear we are now further away from slightly sunnier uplands, as inflation and high interest rates have eaten away at resilience of companies and consumers. Nevertheless, with wage growth still hot and fuel prices higher, it still looks likely that the Bank of England will raise interest rates again next week from 5.25% to 5.5%.”
In equity news, shares in Aviva gained as the UK insurer revealed it has sold its said it had agreed to sell its 25.9% stake in Singapore Life Holdings (Singlife), together with two debt instruments, to Sumitomo Life for £800m in cash.
Reporting by Frank Prenesti for Sharecast.com