London close: Stocks rise despite stagnant UK growth data

London markets closed higher on Thursday, as investors shrugged off some stagnant UK economic data.

The FTSE 100 rose 0.24% to 7,843.38, while the FTSE 250 climbed 0.35% to finish the day at 19,070.13.

Thursday’s moves came despite a report showing that the UK economy stagnated in February, as widespread industrial action during the month disrupted productivity.

In currency markets, sterling was last 0.34% stronger on the dollar, trading at $1.2527, while it weakened 0.25% against the euro to change hands at €1.1330.

“The afternoon has seen stocks bolstered by weaker PPI figures in the US, along with a rise in jobless claims,” said IG chief market analyst Chris Beauchamp.

“This means that the market is once again back to hoping that more bad news will tilt the Fed further towards a pause beyond the next meeting, though hopes for a ‘no change’ at the upcoming get-together remain dim.”

Beauchamp said it was, however, “just an appetiser” ahead of earnings, which would take centre stage for at least the next fortnight.

“Tomorrow’s bank figures of course will focus on the prospect of any further crisis in the sector, and hints that credit conditions are worsening could also go into the ‘bad news is good news’ pile - as long as there isn’t too much of it.”

UK economy stagnates in February, house prices fall further

The UK economy failed to grow in February as strikes weighed heavily on productivity, according to fresh data from the Office for National Statistics (ONS).

It showed zero growth, compared to January's 0.4% growth, and below expectations for a 0.1% increase.

While falls in services and production were partly offset by construction growth, the education sector, hit by teacher strikes, was the biggest contributor to negative growth in services.

Public administration, also affected by strikes, was the second largest contributor to the negative growth.

“Looking ahead, we continue to expect GDP to be broadly flat again in the second quarter,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

“Admittedly, households’ real disposable incomes likely will rise by almost 1% quarter-on-quarter in the second quarter, primarily due to a sharp increase in the value of benefits in April.

“But some households will prioritise rebuilding the savings buffer that they have run down over the last year, while others will step up debt repayments in response to the rise in interest rates, ensuring that real expenditure rises only marginally.”

Meanwhile, UK house prices continued to fall, although property surveyors predicted a stabilisation of the market in the next year as borrowing costs looked set to ease.

The Royal Institution of Chartered Surveyors (RICS) reported a fall in its house price net balance to -43 last month, from -47 in February.

"The overall tone of the feedback received from respondents is still one of caution towards the sales market, which is reflected in both the headline price and activity indicators," said RICS chief economist Simon Rubinsohn.

“There is also a sense that the medium-term outlook is looking a little more settled, helped by the perception that the interest rate cycle may be near the peak.”

On the continent, eurozone industrial production rose more than expected in February according to Eurostat, with production ex-construction rising 1.5% on the month, beating consensus expectations for a 1% increase.

Annual industrial production rose 2% in February, compared to 0.9% in January, above consensus expectations of 1.5% growth.

Meanwhile, in Germany, official final data showed that inflation softened in March, mainly due to falling energy costs.

Across the pond, the US labour market eased slightly last week, with initial unemployment claims rising 11,000 over the period ended 8 April to reach 239,000.

Additionally, producer prices stateside fell unexpectedly, impacted by declines in energy and services prices.

Finally on data, exports in China unexpectedly spiked in March, growing 14.8% year on year against expectations of a contraction.

Imports fell by 1.4%, lower than forecasts of a 5% decline.

Broker boosts housebuilders, ex-divs prove a drag

Housebuilders were among the top gainers on London’s equity markets, after HSBC upgraded a group of them, citing that the downturn in the housing market and weak recovery in return on invested capital were now priced in.

Barratt Developments rose 2.38%, Bellway climbed 2.85%, Berkeley Group Holdings was up 1.98%, Crest Nicholson Holdings gained 3.73%, Redrow was up 3.31% and Taylor Wimpey increased by 2.03%.

"We now have greater visibility about the shape of the current housing market downturn for the housebuilders’ profits and cash flows and their recovery from it, which we believe to be more than priced-in to share prices," HSBC said.

However, Persimmon bucked the trend, falling 3.45% as it went ex-dividend.

Grocery giant Tesco added 0.6% after saying it expected to post flat profits this year, and announced a £750m share buyback as annual earnings fell last year after absorbing the cost of inflation.

Burberry Group was up 2.52% following solid first-quarter sales from luxury brand LVMH, while PZ Cussons advanced 3.74% after posting a rise in third-quarter revenues.

On the downside, Lloyds Banking Group, Unite Group, TP ICAP Group, ITV and Harbour Energy traded without entitlement to the dividend.

Lloyds was down 2.76%, Unite fell 2.97%, TP ICAP declined 3.53%, ITV dropped 3.47%, and Harbour Energy was 3.5% weaker.

Tobacco firm Imperial Brands also lost ground, falling 1.14%, despite reporting that it was on track to deliver earnings in line with expectations and low single-digit constant currency net revenue growth.

Reporting by Josh White for Sharecast.com.