London close: Stocks finish higher as US GDP surges past expectations

London stocks finished higher on Friday as data showed the US economy grew at the fastest pace in two years in the third quarter.

The FTSE 100 closed up 0.14% to 6,996.26 points.

US gross domestic product increased an annualised 2.9% in the third quarter after rising 1.4% in the second. It marked the strongest rise since the third quarter of 2014 and beat expectations of 2.5%.

Capital Economics said: “The bigger than expected 2.9% annualised gain in third-quarter GDP confirms that the economic recovery has regained some of the momentum lost within the last year.

“As such, this leaves the Fed firmly on track to raise interest rates in December and a hike at next week’s Federal Open Market Committee meeting isn’t entirely out of the question.”

On the downside for the US, a report from the University of Michigan showed consumer confidence fell more than expected in October. The consumer confidence index slipped to 87.2 in October from 91.2 in September, compared to forecasts of 88.1. It matched a September 2015 reading as the weakest since October 2014.

However, University of Michigan survey director Richard Curtin said the decline in confidence may be a “temporary bout of uncertainty” caused by the elections.

Closer to home, the pound fell against the dollar as worries about Brexit grew after data showed a decline in consumer confidence and after two legal challenges on the EU referendum were rejected. The pound dropped 0.21% to $1.2139 at 1634 BST.

A survey from market research firm GfK showed UK sentiment dropped in October for the first time since the Brexit vote on 23 June, with its consumer confidence index down to -3 from -1 the month before.

Meanwhile, the YouGov/Cebr consumer confidence index fell to 109.3 in October, marking its lowest level since 2013 apart from the drop in July after the UK voted to leave the EU.

Pantheon Macroeconomics economist Samuel Tombs said rising inflation and the perception that “hard Brexit” risks have increased are beginning to dampen sentiment.

“Going forward, we continue to think that consumer confidence will embark on a downward path as inflation continues to rise and job prospects worsen,” he said.

Adding to worries about Brexit, the High Court in Belfast rejected two legal challenges on the referendum. A judge ruled that the 1998 Good Friday Agreement did not prevent the government from triggering Article 50, the clause in the Lisbon treaty which will start a two-year clock on formal negotiations to leave the EU.

In corporate news, British Airways and Iberia parent International Consolidated Airlines Group flew higher as it reported a 3.6% drop in third-operating profit before exceptional items to €1.2bn, which was a touch above analysts’ expectations.

Housebuilders Barratt Developments, Taylor Wimpey and Persimmon all gained, with traders pointing to a media report that privately-owned housebuilder Cala Group has been approached about a takeover by a mystery Chinese bidder ahead of a government push to deliver one million new homes by 2020.

Chemicals company Elementis surged after confirming it expects overall earnings for the year to be in line with market views. The group said on Friday that sales for specialty products rose in the third quarter but the chromium business remained “challenging”.

Electrocomponents was a high riser as Liberum initiated coverage of the stock at ‘buy’ with a 420p price target, which implies total return potential of 18%.

Royal Bank of Scotland slumped after the bank reported a loss attributable to shareholders of £469m compared to a profit of £940m in the same period last year as it took a hit from litigation and restructuring costs.

Berendsen was under the cosh a day after it issued a profit warning, as HSBC downgraded the stock to ‘hold’ from ‘buy’.

Unite Group was also hit by a broker note, as Morgan Stanley downgraded its stance on the company to ‘underweight’ from ‘overweight’ and cut the price target to 590p from 700p.

Market Movers

FTSE 100 (UKX) 6,996.26 0.14%
FTSE 250 (MCX) 17,644.83 0.36%
techMARK (TASX) 3,395.70 -0.10%

FTSE 100 - Risers

International Consolidated Airlines Group SA (CDI) (IAG) 438.00p 5.93%
Sainsbury (J) (SBRY) 254.00p 4.10%
Barratt Developments (BDEV) 456.70p 4.06%
easyJet (EZJ) 952.50p 3.42%
Next (NXT) 4,968.00p 3.37%
Carnival (CCL) 3,873.00p 3.22%
Whitbread (WTB) 3,635.00p 2.95%
Taylor Wimpey (TW.) 142.90p 2.88%
Pearson (PSON) 762.50p 2.62%
Persimmon (PSN) 1,714.00p 2.57%

FTSE 100 - Fallers

Shire Plc (SHP) 4,781.50p -3.40%
Intu Properties (INTU) 276.00p -1.92%
Prudential (PRU) 1,369.00p -1.90%
Hikma Pharmaceuticals (HIK) 1,780.00p -1.77%
Admiral Group (ADM) 1,898.00p -1.40%
Royal Bank of Scotland Group (RBS) 194.00p -1.22%
DCC (DCC) 6,590.00p -1.20%
St James's Place (STJ) 951.00p -0.99%
RSA Insurance Group (RSA) 550.50p -0.90%
Rolls-Royce Holdings (RR.) 734.50p -0.81%

FTSE 250 - Risers

Elementis (ELM) 238.40p 11.14%
Just Eat (JE.) 535.00p 5.63%
Electrocomponents (ECM) 381.60p 4.78%
Crest Nicholson Holdings (CRST) 413.80p 3.71%
Redrow (RDW) 386.10p 3.68%
Hastings Group Holdings (HSTG) 216.80p 3.24%
Sophos Group (SOPH) 231.80p 3.07%
Countryside Properties (CSP) 235.90p 2.88%
Go-Ahead Group (GOG) 2,116.00p 2.62%
Ladbrokes (LAD) 135.00p 2.58%

FTSE 250 - Fallers

Berendsen (BRSN) 984.50p -4.42%
Hunting (HTG) 492.90p -3.35%
Unite Group (UTG) 563.00p -3.26%
Softcat (SCT) 321.20p -3.08%
Amec Foster Wheeler (AMFW) 452.00p -2.98%
CLS Holdings (CLI) 1,529.00p -2.80%
Safestore Holdings (SAFE) 359.60p -2.78%
Vectura Group (VEC) 135.80p -2.37%
AO World (AO.) 163.30p -2.22%
Redefine International (RDI) 42.08p -2.03%