London close: FTSE gains as retailers, miners rally; GDP disappoints

London stocks ended sharply higher on Monday thanks to strong showings in the retail and mining sectors, as investors mulled weaker-than-expected UK GDP data.

The FTSE 100 closed up 1.7% at 7,473.03 while sterling was 1% firmer against the dollar at 1.1700.

IG market analyst Chris Beauchamp said: "The rally in equities over the past week will have many scratching their heads, wondering why markets have been able to rebound despite the lack of news. But it is because there is so little in the way of big news that markets have recovered. It has allowed investors to focus on valuations, and put the rate hikes of the ECB and the Fed’s hawkish commentary behind them. The lack of earnings news too has made it easier for the FTSE 100 and others to bounce.

"But it will not stay quiet for ever. The next Fed decision will soon begin to loom large, and it is likely that even a softer CPI reading in the US this week will not deter the FOMC from another bumper rate hike. The broader outlook still remains tough, and it makes sense to expect indices to reverse course in the weeks to come."

On the macro front, figures released earlier by the Office for National Statistics showed the UK economy returned to growth in July, but this was weaker than expected as industrial production and construction shrank.

GDP rose 0.2% following a 0.6% decline in June, coming in below economists’ expectations of 0.5% growth.

The services sector was the main driver of the rise in GDP, with growth of 0.4% in July, up from 0.5% the month before.

Meanwhile, production contracted by 0.3% following a 0.9% decline in June, mainly due to a fall of 3.4% in electricity, gas, steam, and air conditioning supply. Construction fell 0.8% in July following a 1.4% contraction the month before. This came solely from repair and maintenance, which fell 2.6%.

This marked the second consecutive contraction for production and construction.

The ONS said monthly GDP is now estimated to be 1.1% above its pre-Covid level in February 2020.

Capital Economics said: "The disappointingly small rebound in real GDP in July suggests that the economy has little momentum and is probably already in recession. The government’s utility price freeze is unlikely to change that."

In equity markets, retailers were the top performers, with B&Q owner Kingfisher, Sainsbury’s, Tesco, Ocado and JD Sports all up.

Miners were also on the rise as metals prices advanced, with Anglo American, Glencore and Rio Tinto all higher.

Iron ore pellets exporter Ferrexpo - whose operating base is in central Ukraine - surged following reports over the weekend that Russian forces had suffered their worst defeat since March.

Ladbrokes owner Entain rallied even as Australia's financial crimes regulator said it would be investigating the company’s compliance with anti-money laundering and counter-terrorism financing laws.

On the downside, government contractor Serco slid as it said chief executive Rupert Soames would retire in September 2023 and step down both from the board at the end of this December 2022.

AJ Bell investment director Russ Mould pointed out that Soames is widely credited as reviving Serco’s fortunes.

"He restored the outsourcing group’s credibility after the electronic tagging scandal where Serco took responsibility for three offences of fraud and two of false accounting between 2010 and 2013," he said.

Tate & Lyle was knocked lower by a downgrade to ‘hold’ at Jefferies.

Market Movers

FTSE 100 (UKX) 7,473.03 1.66%
FTSE 250 (MCX) 19,513.87 1.70%
techMARK (TASX) 4,366.86 1.56%

FTSE 100 - Risers

Kingfisher (KGF) 256.90p 6.11%
Howden Joinery Group (HWDN) 619.80p 5.98%
Tesco (TSCO) 253.10p 5.50%
Sainsbury (J) (SBRY) 213.40p 5.33%
Ocado Group (OCDO) 797.00p 5.31%
Berkeley Group Holdings (The) (BKG) 3,726.00p 5.19%
Flutter Entertainment (CDI) (FLTR) 10,710.00p 4.64%
Ashtead Group (AHT) 4,480.00p 4.38%
JD Sports Fashion (JD.) 131.50p 4.28%
Smurfit Kappa Group (CDI) (SKG) 3,020.00p 4.25%

FTSE 100 - Fallers

M&G (MNG) 201.70p -1.18%
Pershing Square Holdings Ltd NPV (PSH) 2,855.00p -0.70%
Melrose Industries (MRO) 126.65p -0.55%
Imperial Brands (IMB) 1,952.00p -0.03%
Avast (AVST) 716.60p 0.00%
Meggitt (MGGT) 798.80p 0.03%
Smith & Nephew (SN.) 1,105.00p 0.05%
Centrica (CNA) 87.14p 0.28%
Aviva (AV.) 444.80p 0.38%
Rentokil Initial (RTO) 554.80p 0.40%

FTSE 250 - Risers

Ferrexpo (FXPO) 173.70p 11.27%
NCC Group (NCC) 241.00p 9.79%
Wood Group (John) (WG.) 144.40p 8.94%
Bridgepoint Group (Reg S) (BPT) 281.40p 8.65%
HGCapital Trust (HGT) 399.00p 8.28%
Marks & Spencer Group (MKS) 126.70p 7.69%
ASOS (ASC) 725.00p 7.65%
Wizz Air Holdings (WIZZ) 2,201.00p 6.28%
Volution Group (FAN) 357.50p 5.93%
Frasers Group (FRAS) 856.00p 5.42%

FTSE 250 - Fallers

Serco Group (SRP) 168.00p -6.77%
Network International Holdings (NETW) 274.80p -5.70%
Abrdn Private Equity Opportunities Trust (APEO) 416.00p -3.70%
Aston Martin Lagonda Global Holdings (AML) 172.75p -3.47%
Tate & Lyle (TATE) 735.80p -3.34%
BH Macro Ltd. GBP Shares (BHMG) 4,720.00p -3.08%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 497.00p -2.17%
Chrysalis Investments Limited NPV (CHRY) 71.30p -1.66%
ICG Enterprise Trust (ICGT) 1,064.00p -1.48%
Apax Global Alpha Limited (APAX) 167.20p -1.07%