London midday: Stocks fall after GDP revision, amid Middle East tensions

London stocks had fallen into the red by midday on Monday amid growing tensions in the Middle East and as data showed the UK economy grew less than initially thought in the second quarter of the year.

The FTSE 100 was down 0.5% at 8,282.15.

Figures released earlier by the Office for National Statistics showed that GDP grew 0.5% in the three months to June, down from a previous estimate of 0.6% growth.

The ONS said the services sector grew by 0.6% the second quarter, with widespread growth across the sector. This was partially offset by falls in both the production and construction sectors.

GDP for 2023 as a whole was estimated to have increased by 0.3%, revised up from the first estimate of 0.1% growth, mainly due to updated data from the income approach to measuring GDP.

ONS director of economic statistics, Liz McKeown, said: "Today’s updated GDP figures for 2023 and 2024 include new annual survey data, VAT returns and updates information about the relative size of each industry for the first time.

"However, after taking on these improvements, the quarterly growth path across the last 18 months is virtually unchanged.

"Our latest data show that household savings continue to increase and are now at the highest rate since the Covid-19 lockdowns."

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said sentiment was "subdued" amid conflict in the Middle East and after the UK data.

"However, although this latest snapshot of the UK economy doesn’t, on the face of it, look inspiring, it may bolster the case for further interest rate cuts," she said.

"Financial markets are putting the chances of a rate reduction next month at more than 88%. The data also shows that there was an increase in business investment, which rose by 1.4% in Q2. Companies putting a bit more money into equipment, infrastructure and intellectual property is a small move, but is still an encouraging trend, essential for longer-term growth.

"Oil prices have been climbing as Israel’s bombardment of Lebanon and Yemen has intensified, fanning flames of concern about an escalation of conflict in the Middle East. Brent Crude rose 1.5% to $72.5 dollars a barrel as supply worries ratcheted up. Israeli Prime Minister Benjamin Netanyahu has warned Iran, which has backed Hezbollah, that it could also become a target. This could affect the distribution of oil from Iran and the passage of tankers through the Strait of Hormuz, a key route for global crude supplies."

Elsewhere, the latest survey from Nationwide showed that house prices grew at their fastest annual rate in two years in September.

Prices rose 3.2% on the year following 2.4% growth in August and marking the fastest pace of growth since November 2022.

On the month, prices increased 0.7% in September following a 0.2% decline the month before.

The average price of a house stood at £266,094 in September, versus £265,375 a month earlier.

Robert Gardner, Nationwide's chief economist, said: "Income growth has continued to outstrip house price growth in recent months while borrowing costs have edged lower amid expectations that the Bank of England will continue to lower interest rates in the coming quarters.

"These trends have helped to improve affordability for prospective buyers and underpinned a modest increase in activity and house prices, though both remain subdued by historic standards."

Market participants were also mulling news of more stimulus in China, after three megacities announced the relaxation of home buying rules and the central bank said it would ask lenders to lower mortgage rates.

In equity markets, Rightmove slumped as it rejected a fourth, £6.2bn takeover offer from Rupert Murdoch’s Australian property business REA Group, saying it continues to undervalue the property portal.

3i Group slumped following a report that short-seller ShadowFall Capital and Research had taken out a multimillion-pound short position against the investment trust, saying that its largest holding, Action, was overvalued.

Aston Martin tanked as it said full-year profits were expected to decline as a result of a cut to wholesale volume guidance due to supply chain disruption and weak demand in China.

Outside the FTSE 350, Mulberry surged as Mike Ashley’s Frasers Group announced an £83m takeover bid for the luxury handbag maker, criticising it for not informing Frasers of plans to raise £10m.

Market Movers

FTSE 100 (UKX) 8,282.15 -0.46%
FTSE 250 (MCX) 21,060.79 -0.85%
techMARK (TASX) 4,852.76 -0.30%

FTSE 100 - Risers

Rio Tinto (RIO) 5,358.00p 0.92%
Hikma Pharmaceuticals (HIK) 1,913.00p 0.90%
BP (BP.) 390.65p 0.64%
Flutter Entertainment (DI) (FLTR) 17,900.00p 0.56%
InterContinental Hotels Group (IHG) 8,386.00p 0.50%
Rolls-Royce Holdings (RR.) 527.00p 0.38%
Shell (SHEL) 2,433.00p 0.37%
Glencore (GLEN) 428.50p 0.34%
Darktrace (DARK) 577.80p 0.24%
Prudential (PRU) 701.40p 0.20%

FTSE 100 - Fallers

Rightmove (RMV) 644.20p -3.65%
Intermediate Capital Group (ICG) 2,250.00p -3.52%
Smiths Group (SMIN) 1,713.00p -2.73%
easyJet (EZJ) 526.60p -2.52%
Melrose Industries (MRO) 460.20p -2.33%
International Consolidated Airlines Group SA (CDI) (IAG) 207.40p -2.31%
3i Group (III) 3,317.00p -2.12%
Frasers Group (FRAS) 849.50p -2.02%
Airtel Africa (AAF) 114.60p -1.88%
Fresnillo (FRES) 610.00p -1.77%

FTSE 250 - Risers

Hammerson (HMSO) 318.95p 900.47%
Fidelity China Special Situations (FCSS) 224.50p 4.91%
North Atlantic Smaller Companies Inv Trust (NAS) 3,990.00p 1.79%
W.A.G Payment Solutions (WPS) 84.80p 1.68%
Baillie Gifford US Growth Trust (USA) 205.00p 1.49%
Energean (ENOG) 904.00p 1.12%
Bakkavor Group (BAKK) 157.50p 0.96%
SDCL Energy Efficiency Income Trust (SEIT) 63.60p 0.95%
NextEnergy Solar Fund Limited Red (NESF) 79.60p 0.89%
Auction Technology Group (ATG) 424.00p 0.83%

FTSE 250 - Fallers

Aston Martin Lagonda Global Holdings (AML) 124.40p -22.01%
Wizz Air Holdings (WIZZ) 1,472.00p -3.35%
Alpha Group International (ALPH) 2,190.00p -2.67%
PRS Reit (The) (PRSR) 102.40p -2.48%
Spectris (SXS) 2,732.00p -2.43%
Jupiter Fund Management (JUP) 86.60p -2.37%
Watches of Switzerland Group (WOSG) 475.00p -2.22%
British Land Company (BLND) 435.80p -2.16%
Mitchells & Butlers (MAB) 295.50p -2.15%
Sirius Real Estate Ltd. (SRE) 97.80p -2.15%