London close: Stocks higher ahead of key data next week

London stocks managed a positive finish on Friday after data showed the UK economy contracted a touch less than expected in the second quarter.

The FTSE 100 ended the session up 0.47% at 7,500.89, and the FTSE 250 was ahead 0.46% at 20,338.96.

Sterling was in a mixed state, meanwhile, last trading 0.66% weaker against the dollar at $1.2125, while it was flat on the euro at €1.1822.

“The week is rounding out with further upside for equities, as the general positive feeling in the wake of this week’s inflation data continues,” said IG chief market analyst Chris Beauchamp.

“We are now firmly into the quiet period of August, and while there is plenty of UK economic data next week, major earnings are thin on the ground.

“But the drift higher seems set to carry on, especially since the market is apparently content to ignore any warnings about further US interest rate hikes, having been calmed by the downtick in US CPI and PPI this week.”

Plenty of UK data releases are scheduled for next week, with June’s unemployment rate expected to remain stable at 3.8% on Tuesday, while year-on-year inflation is set to accelerate to 9.8% in July on Wednesday, from 9.4% in June.

Among the other key data points are GfK’s consumer confidence index for August, and July’s figures for both retail sales and public sector net borrowing, all due next Friday.

In economic news, the UK economy contracted in the second quarter, with the Office for National Statistics reporting that GDP fell 0.1%, following 0.8% growth in the previous quarter.

Analysts had been expecting a 0.2% contraction.

There was a 0.4% decline in services output, with the largest negative contribution from human health and social work activities.

“Health was the biggest reason the economy contracted as both the test and trace and vaccine programmes were wound down, while many retailers also had a tough quarter,” said ONS director of economic statistics Darren Morgan.

“These were partially offset by growth in hotels, bars, hairdressers and outdoor events across the quarter, partly as a result of people celebrating the Platinum Jubilee.”

Monthly estimates from the ONS showed that GDP fell by 0.6% in June following a downwardly-revised 0.4% increase in May, and versus consensus expectations for a 1.2% contraction

Last week, the Bank of England warned the UK would enter a recession at the end of this year, as it hiked interest rates by the most in 27 years.

“Uncertainty regarding the extent of the disruption caused by the Jubilee will mean we will have to wait for August’s GDP data to accurately assess the economy’s underlying momentum,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

“All told, we look for a 0.3% quarter-on-quarter rise in GDP in the fourth quarter, with the increase partly attributable to the rebound from the Jubilee-induced dip.

“A winter recession can’t be ruled out, given that the rise in Ofgem’s energy price cap in October will boost CPI inflation - and hence reduce real incomes - by nearly four percentage points.”

Across the channel, industrial production in Europe’s common currency rose more than expected in June, although analysts were warning of a serious softening in the second half of the year.

The European Union’s statistics office Eurostat said eurozone industrial production rose by a seasonally-adjusted 0.7% month-to-month in June, after an upwardly-revised 2.1% increase in May.

That was well above consensus expectations for a 0.2% expansion, while on a year-over-year basis, production grew 2.4%, up from 1.6% in May and also above the 0.8% pencilled in by economists.

“We think industry will be a drag on GDP growth throughout the rest of the year,” said Melanie Debono at Pantheon.

“Survey data suggest industrial output took a leg down last month; the manufacturing output PMI fell further below the 50 ‘no change’ level.

“Demand has started to wane and the sector is still grappling with lingering pandemic-related supply constraints and bottlenecks, which have only been exacerbated by EU sanctions on Russia as well as Russia’s cut to gas flows since mid-June, which is leading to energy rationing in some eurozone countries.”

Turning stateside, the cost of goods in the US that were purchased overseas dropped more sharply than expected last month, dragged lower by a fall in imported fuel prices.

Friday's data marked the fourth consecutive monthly drop, the first month-on-month decline of 2022 and the biggest drop since April 2020 according to Oxford Economics.

The Department of Labor reported that in seasonally adjusted terms, the country's import price index slipped at a month-on-month pace of 1.4%, wider than the 0.9% fall anticipated, as fuel import prices fell by 7.5%.

Outside of fuel, import prices were off by 0.5%.

"With a synchronised slowdown in global growth factoring into lower oil prices, we expect import price inflation to remain on a gradual downtrend through the end of the year, barring any unforeseen supply shocks," said Oxford’s US economist Mahir Rasheed.

“Rising interest rates and a more modest growth path for the economy will also support slower growth in import prices, especially as domestic demand eases and falls into a healthier balance with supply."

Finally on data, consumer confidence in the US improved a bit more than anticipated last month, albeit from June's all-time record low.

The University of Michigan's preliminary consumer confidence index for August rose from July's print of 51.5 to 55.1.

Economists had forecast a reading of 52.0.

On London’s equity markets, bookmaker Flutter Entertainment jumped 14.1% after it said US revenues would be ahead of expectations, and that interim pre-tax losses had widened in the first half.

GSK gained 3.57% after saying it would "vigorously defend" all claims related to its now-discontinued heartburn drug Zantac.

It added that both the US Food and Drug Administration and the European Medicines Agency had concluded there was no evidence of a causal association between ranitidine - branded Zantac - and the development of cancer.

Shares in the pharmaceuticals giant had tumbled on Thursday amid worries about upcoming litigation.

Haleon - GSK' s recent consumer products spinoff - gained 2.18% following heavy losses on Thursday as well, as it said it was not a party to any of the Zantac claims.

Elsewhere, Georgia's TBC Bank gained 6.73% after it posted lower second-quarter pre-tax profits on the back of increased operating expenses, but reiterated both medium-term and full-year targets.

TBC said second-quarter operating expenses widened 21.5% to GEL 163.65m (£49.88m), leading to a pre-tax profit of GEL 262.62m (£80.06m) for the period.

On the downside, 888 Holdings tanked 10.81% after the gambling firm reported a sharp fall in interim profit as the cost-of-living crisis and tougher online gambling safety rules hit the bottom line.

QinetiQ Group fell 3.85% after an undisclosed institutional shareholder sold around £90m worth of the firm's stock.

According to terms seen by Bloomberg, the shares were sold for 352p each - a discount of around 5.9% to the closing share price on Thursday.

B&Q owner Kingfisher lost 2.7%, and homeware retailer Dunelm Group was off 1.19%, after both received rating downgrades from UBS.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,500.89 0.47%
FTSE 250 (MCX) 20,338.96 0.46%
techMARK (TASX) 4,376.54 1.23%

FTSE 100 - Risers

Flutter Entertainment (CDI) (FLTR) 10,705.00p 14.10%
Mondi (MNDI) 1,705.00p 11.22%
Entain (ENT) 1,413.00p 4.09%
GSK (GSK) 1,450.00p 3.57%
Centrica (CNA) 79.64p 2.42%
NATWEST GROUP PLC ORD 100P (NWG) 262.00p 2.10%
AstraZeneca (AZN) 10,712.00p 1.96%
Abrdn (ABDN) 175.60p 1.59%
Unite Group (UTG) 1,175.00p 1.56%
Smurfit Kappa Group (CDI) (SKG) 3,209.00p 1.55%

FTSE 100 - Fallers

Kingfisher (KGF) 248.90p -2.70%
Dechra Pharmaceuticals (DPH) 3,568.00p -2.41%
Hikma Pharmaceuticals (HIK) 1,532.50p -2.08%
Antofagasta (ANTO) 1,144.50p -1.93%
JD Sports Fashion (JD.) 129.10p -1.86%
Howden Joinery Group (HWDN) 672.60p -1.84%
Scottish Mortgage Inv Trust (SMT) 912.40p -1.53%
Anglo American (AAL) 2,963.00p -1.46%
M&G (MNG) 219.00p -1.44%
London Stock Exchange Group (LSEG) 8,184.00p -1.42%

FTSE 250 - Risers

Darktrace (DARK) 430.50p 7.63%
TBC Bank Group (TBCG) 1,648.00p 6.60%
Network International Holdings (NETW) 245.60p 5.59%
Bridgepoint Group (Reg S) (BPT) 281.20p 3.84%
Polymetal International (POLY) 219.50p 3.54%
TUI AG Reg Shs (DI) (TUI) 153.65p 3.47%
Bank of Georgia Group (BGEO) 1,800.00p 3.45%
UK Commercial Property Reit Limited (UKCM) 78.10p 3.44%
Drax Group (DRX) 723.50p 3.21%
Savills (SVS) 1,059.00p 3.12%

FTSE 250 - Fallers

888 Holdings (DI) (888) 142.70p -10.81%
QinetiQ Group (QQ.) 359.60p -3.85%
Syncona Limited NPV (SYNC) 197.20p -3.80%
Babcock International Group (BAB) 329.60p -3.12%
Baltic Classifieds Group (BCG) 150.40p -3.09%
HarbourVest Global Private Equity Limited A Shs (HVPE) 2,425.00p -2.41%
Liontrust Asset Management (LIO) 1,040.00p -2.26%
Caledonia Investments (CLDN) 3,770.00p -2.08%
ASOS (ASC) 987.50p -1.94%
Petershill Partners (PHLL) 235.50p -1.67%