London midday: Stocks flat after UK GDP as traders await Yellen speech

London stocks were flat on Friday as official data showed second quarter UK economic growth accelerated in line with expectations and as investors awaited a speech from Federal Reserve chair Janet Yellen.

The Office for National Statistics confirmed UK gross domestic product grew 0.6% on the quarter in the second quarter, up from 0.4% in the first three months of the year.

On the year, growth was confirmed at 2.2%, compared to 2% in the first quarter.

Mike Read, co-founder of app-only trading network Pelican, said: “Those who feel the Bank of England were too quick to cut interest rates earlier in the month will now have all the more reason to grumble following today’s positive GDP figures.

“Despite the near universal agreement that the British economy would suffer significantly in a post-Brexit climate, June’s extraordinary retail sales figures coupled with today’s GDP data paint a slightly rosier picture.”

The attention now turns to the Jackson Hole conference where Fed chair Janet Yellen’s speech at 1500 BST will be closely eyed for hints on the timing of the next interest rate hike. However, many economists expect Yellen will keep her cards close to her chest.

“As we look ahead to this afternoon’s Jackson Hole speech it would be surprising if Mrs Yellen was either dovish or hawkish, though given the odds currently assigned to the prospect of a move in September the risk is likely to be towards the hawkish side, for no other reason than the Federal Reserve will want to keep markets guessing in the event we see an improvement in the economic data between now and 21 September,” said Michael Hewson, chief market analyst at CMC Markets.

“The ability of the Fed to move also continues to be constrained by other central banks and potential future policy moves on their part as they look to ease further, with the Bank of Japan expected to come under further pressure after Japanese CPI fell further into deflationary territory. “

The US also sees the release of GDP data at 1330 BST, followed by the University of Michigan’s consumer confidence index at 1500 BST.

Elsewhere, Japan’s core consumer price index, which excludes food and energy prices, fell 0.5% year-on-year in July compared to a 0.4% decline in June. Analysts had expected no change.

The headline CPI dropped an annualised 0.4% in July, the same rate of decline as the previous month and in line with analysts’ estimates.

Economists said the weak inflation data is likely to add pressure on the Bank of Japan for further stimulus measures.

“The monetary game in Japan has become very challenging given that the BoJ has gradually lost credibility and support from the market. It is time for the BoJ to surprise the insatiable market, yet Mr. Kuroda is running out of resources,” said Ipek Ozkardskaya, senior market analyst at London Capital Group.

Meanwhile, oil prices retreated ahead of Yellen’s speech. If the Fed chair hints towards an interest rate hike this year, the dollar is likely to strengthen, sending oil prices lower as it makes crude imports more expensive for holders of other currencies.

Brent crude fell 0.68% to $49.33 per barrel and West Texas Intermediate dropped 0.36% to 447.16 per barrel at 1135 BST.

On the company front, mining stocks rallied as metal prices rose with Glencore, Rio Tinto and BHP Billiton among the biggest risers.

BAE Systems was given a boost after Berenberg upgraded the stock to ‘buy’ from ‘hold’ and lifted the price target to 580p from 520p.

Pharmaceutical stocks continued to slide after US presidential favourite Hillary Clinton slammed US-based Mylan over its 480% hike in the price of its EpiPen epinephrine product since the company acquired it in 2007.

Following her remarks, Mylan said it was cutting the cost of the EpiPen 2-Pak through the use of a savings cards that will cover up to $300, effectively halving the price.

Shares in Astrazeneca, Shire and GlaxoSmithKline dropped.

Restaurant Group gained after it swung to a pre-tax loss in the first half on the back of restructuring costs, while like-for-like sales fell but the company said trading remains in line with its full-year expectations.

Ladbrokes jumped as Berenberg raised its rating to ‘buy’ from ‘hold’ and lifted its target price to 185p from 130p, saying the company is its second favourite pick in gaming after Playtech.

Market Movers

FTSE 100 (UKX) 6,824.95 0.12%
FTSE 250 (MCX) 17,913.48 0.17%
techMARK (TASX) 3,467.45 -0.07%

FTSE 100 - Risers

Glencore (GLEN) 184.55p 2.96%
Rio Tinto (RIO) 2,441.00p 2.18%
BAE Systems (BA.) 539.50p 2.08%
Rolls-Royce Holdings (RR.) 785.00p 1.42%
Travis Perkins (TPK) 1,703.00p 1.25%
Hikma Pharmaceuticals (HIK) 2,176.00p 1.21%
BHP Billiton (BLT) 1,059.00p 1.15%
Anglo American (AAL) 849.20p 1.14%
Antofagasta (ANTO) 532.00p 0.95%
Royal Dutch Shell 'A' (RDSA) 1,894.00p 0.91%

FTSE 100 - Fallers

AstraZeneca (AZN) 4,953.50p -1.15%
Burberry Group (BRBY) 1,318.00p -1.13%
Shire Plc (SHP) 4,861.00p -0.84%
Sainsbury (J) (SBRY) 240.40p -0.83%
Unilever (ULVR) 3,533.00p -0.74%
Imperial Brands (IMB) 4,008.50p -0.68%
London Stock Exchange Group (LSE) 2,782.00p -0.68%
Royal Bank of Scotland Group (RBS) 194.20p -0.66%
Admiral Group (ADM) 2,049.00p -0.63%
Prudential (PRU) 1,352.50p -0.59%

FTSE 250 - Risers

Amec Foster Wheeler (AMFW) 579.50p 7.91%
Restaurant Group (RTN) 429.10p 5.33%
Shawbrook Group (SHAW) 233.60p 4.57%
SIG (SHI) 124.00p 4.20%
JRP Group (JRP) 103.00p 3.73%
Ladbrokes (LAD) 162.10p 3.31%
Smurfit Kappa Group (SKG) 1,936.00p 2.87%
Hochschild Mining (HOC) 277.00p 2.59%
McCarthy & Stone (MCS) 202.80p 2.42%
Virgin Money Holdings (UK) (VM.) 317.90p 2.38%

FTSE 250 - Fallers

Worldwide Healthcare Trust (WWH) 2,040.00p -3.68%
Pagegroup (PAGE) 344.10p -2.91%
Carillion (CLLN) 273.60p -2.88%
Euromoney Institutional Investor (ERM) 1,031.00p -2.74%
Ascential (ASCL) 258.30p -2.71%
BBA Aviation (BBA) 246.00p -2.30%
CMC Markets (CMCX) 271.00p -2.06%
Vesuvius (VSVS) 352.10p -1.92%
Essentra (ESNT) 515.00p -1.90%
P2P Global Investments (P2P) 824.00p -1.90%