London midday: Stocks tick higher after UK GDP data; water firms in focus

London stocks had edged further into the black by midday on Thursday following better-than-expected UK GDP data, as investors looked ahead to the latest US inflation reading.

The FTSE was up 0.3% at 8,204.48, while sterling was 0.2% firmer against the dollar at 1.2877, hitting a four-month high after figures from the Office for National Statistics showed the economy grew 0.4% on the month in May following a flat reading in April. This was ahead of expectations for 0.2% growth.

Leading the improvement was the construction sector, which grew at its fastest rate in almost a year. It reversed April’s 1.1% slide - when wet weather hit activity - with a 1.9% uplift.

Production output also improved, however, nudging up 0.2% following a 0.9% decline a month earlier. Services growth was unchanged at 0.3%.

In the three months to May, GDP rose by 0.9%, driven by a 1.1% uplift in services output. It was the quickest pace of growth for over two years, the ONS noted.

Liz McKeown, director of economic statistics at the ONS, said: "The economy grew strongly in May, with all three main sectors seeing increases. Many retailers and wholesalers had a good month, with both bouncing back from a weak April.

"Construction grew at its fastest rate in almost a year after recent weakness, with house building and infrastructure projects boosting the industry."

Russ Mould, investment director at AJ Bell, said: "The new government has placed economic growth at the heart of its policies and it will be pleased to have inherited positive momentum with GDP.

"The bigger issue is whether the Bank of England will look at this data and feel less inclined to cut rates. After all, cutting rates is something a central bank does to stimulate a lacklustre economy, not grease the wheels for one already moving ahead. That said, momentum could easily lose pace, particularly if the jobs market weakens and sticky inflation causes consumers to stay cautious on spending."

Investors were also mulling the latest residential market survey from the Royal Institution of Chartered Surveyors, which showed that house prices were unchanged in June, but optimism sparked across the sector following the general election.

The headline house price balance in the survey was unchanged month-on-month at -17.

The new buyer enquiries balance was also broadly in line with the previous reading, easing just one point to -7. In contrast, newly agreed sales improved to -7 from -13.

However, three-month price expectations stabilised, with a net balance of 5. Prior to June’s survey, the balance had been in contractionary territory for two years.

A net balance of 20 also expect a recovery in residential sales in the near-term, up from 10 in June and the highest level since January 2022.

"These results indicate that respondents have confidence in the newly-elected Labour government, which has voiced a strong commitment to boosting the housing market, aiming to deliver 1.5m homes over the next five years - a figure not hit since the 1960s," Rics noted.

Looking ahead to the rest of the day, the US consumer price index for June is due at 1330 BST.

In equity markets, water companies gained, with Pennon, Severn Trent and United Utilities all higher after regulator Ofwat outlined draft determinations regarding the industry’s five-year investment plans. Both Severn Trent and Pennon noted that the regulator had categorised their business plans as "outstanding".

RBC Capital Markets said: "Pennon is a significant beneficiary of the outstanding business plan award given the de-rating we have seen in the stock versus peers and a view that this would not have been in market expectations.

"SVT outstanding also a positive, although arguably more expected given a view that SVT are one of the strongest names in the sector."

Severn Trent was also in focus after a trading statement, while Pennon announced that its chief financial officer Steve Buck was stepping down for personal reasons, to be succeeded by Laura Flowerdew.

RS Group advanced as the industrial maintenance, repair and operation products firm said it continues to expect a stabilisation in trading conditions over the current financial year, after a slight fall in like-for-like sales in the first quarter.

Dr Martens was also up as the iconic bootmaker held annual guidance and said trading since the start of the current financial year has been in line with expectations.

On the downside, Trustpilot tumbled despite saying it expects to report a 20% year-on-year increase in first-half booking to $118m.

DCC fell as it reported a "modest" improvement in first-quarter operating profit.

Moonpig was weaker after a group of investors sold 35m shares in the company in a placing via Citi, JPMorgan and Jefferies, raising proceeds of approximately £61m.

Market Movers

FTSE 100 (UKX) 8,213.70 0.25%
FTSE 250 (MCX) 20,922.55 -0.02%
techMARK (TASX) 4,790.88 0.06%

FTSE 100 - Risers

Severn Trent (SVT) 2,723.00p 4.05%
United Utilities Group (UU.) 1,100.00p 3.19%
CRH (CDI) (CRH) 5,986.00p 1.60%
London Stock Exchange Group (LSEG) 9,356.00p 1.52%
Sainsbury (J) (SBRY) 264.20p 1.30%
Pershing Square Holdings Ltd NPV (PSH) 4,264.00p 1.28%
Sage Group (SGE) 1,045.50p 1.21%
Diageo (DGE) 2,531.50p 1.16%
IMI (IMI) 1,805.00p 1.01%
National Grid (NG.) 951.00p 1.00%

FTSE 100 - Fallers

DCC (CDI) (DCC) 5,530.00p -2.81%
International Consolidated Airlines Group SA (CDI) (IAG) 175.00p -1.69%
Croda International (CRDA) 3,953.00p -1.08%
Airtel Africa (AAF) 118.30p -1.00%
InterContinental Hotels Group (IHG) 8,194.00p -0.82%
Coca-Cola HBC AG (CDI) (CCH) 2,678.00p -0.81%
M&G (MNG) 210.20p -0.80%
Antofagasta (ANTO) 2,169.00p -0.78%
Next (NXT) 8,826.00p -0.74%
Berkeley Group Holdings (The) (BKG) 4,740.00p -0.71%

FTSE 250 - Risers

Pennon Group (PNN) 666.50p 7.67%
RS Group (RS1) 771.00p 7.01%
Indivior (INDV) 802.50p 2.88%
Jupiter Fund Management (JUP) 85.20p 2.40%
Crest Nicholson Holdings (CRST) 241.80p 2.37%
Coats Group (COA) 86.40p 2.25%
Currys (CURY) 74.80p 1.98%
Johnson Matthey (JMAT) 1,688.00p 1.87%
Diversified Energy Company (DEC) 1,126.00p 1.44%
Victrex plc (VCT) 1,126.00p 1.44%

FTSE 250 - Fallers

Trustpilot Group (TRST) 218.00p -7.43%
Bytes Technology Group (BYIT) 499.40p -4.69%
Bakkavor Group (BAKK) 145.00p -4.29%
Direct Line Insurance Group (DLG) 191.70p -3.77%
Moonpig Group (MOON) 196.60p -2.67%
CMC Markets (CMCX) 324.00p -2.41%
AO World (AO.) 116.20p -2.19%
Babcock International Group (BAB) 528.00p -2.13%
Carnival (CCL) 1,250.50p -2.00%
Supermarket Income Reit (SUPR) 74.00p -1.99%