London open: Stocks flit between gains and losses after Japan GDP

London stocks were flitting between small gains and losses in early trade on Monday as investors weighed dire Japanese GDP data and growing tensions between the US and China against a liquidity boost from the People's Bank of China.

At 0840 BST, the FTSE 100 was down 0.2% at 6,075.53.

Investors mulled the latest data out of Japan, which showed the economy suffered its worst contraction on record in the second quarter as the coronavirus pandemic took its toll.

GDP shrank by 7.8% on the quarter, accelerating from a 0.6% contraction in the first quarter, coming in worse than the 7.5% decline expected by economists and wiping all the growth since 2011. On an annualised basis, the economy contracted by 27.8%.

Miguel Chanco, senior Asia economist at Pantheon Macroeconomics, said the damage was broad-based as expected, with the nationwide state of emergency that enveloped most of Q2 "killing domestic demand and the near-global lockdown dealing a body-blow to exports".

"Looking forward, expect to see a GDP bounce-back in the current quarter to the tune of 6%, thanks in large part to the very low base set in Q2," he said. "The recovery, overall, will be more gradual than the steepness of the downturn, due to the second Covid-19 wave having over domestic demand and the still-uneven relaxation of restrictions globally."

Relations between the US and China were also in focus after trade talks between the two - which had been due to take place on Saturday - were postponed.

But sentiment got a boost after the People’s Bank of China said it was injecting 700 billion yuan ($101bn) of one-year funding via the medium-term lending facility.

Oanda analyst Jeffrey Halley said the amount was more than expected. "More importantly, the rate was unchanged at 2.95%, implying that there will be no cuts to China's one and five-year loan prime rates on Thursday. The PBOC seems determined to avoid inflating bubbles in the economy but resisting the urge to follow the rest of the world and flood the financial system with liquidity.

"In the longer-term, that may be a wise policy move, especially with the economy on a recovery trajectory."

On home shores, the latest survey from property website Rightmove showed July was the busiest month for home buying in 10 years.

Home movers put more property on the market and agreed more sales than in any month for more than 10 years, worth a record total of over £37bn and 20% higher than the previous high. Based on data collected between 12 July and 8 August, average asking prices were up 4.3% on an annual basis to £319,497 and down 0.2% on the month.

Rightmove director and housing market analyst Miles Shipside said: "Rather than just a release of existing pent-up demand due to the suspension of the housing market during lockdown, there’s an added layer of additional demand due to people’s changed housing priorities after the experience of lockdown. This is also keeping up the momentum of the unexpected mini-boom, which is now going longer and faster."

In equity markets, miners put in a strong performance as metals prices rose, with Anglo American, Rio Tinto, Glencore and BHP all trading up.

Food producer Cranswick rallied as it said full-year results are set to be ahead of expectations after first-quarter revenues rose by almost a quarter as more Britons ate at home during the lockdown.

On the downside, British Airways and Iberia owner IAG, travel company TUI, Premier Inn owner Whitbread and cruise operator Carnival were all weaker as it emerged that Greece and Croatia, along with six other countries, could be next on the UK quarantine list.

Market Movers

FTSE 100 (UKX) 6,075.53 -0.24%
FTSE 250 (MCX) 17,665.91 -0.39%
techMARK (TASX) 3,836.20 -0.55%

FTSE 100 - Risers

Fresnillo (FRES) 1,245.50p 1.84%
Anglo American (AAL) 1,908.20p 1.54%
Polymetal International (POLY) 2,003.00p 1.32%
Smurfit Kappa Group (SKG) 2,758.00p 1.25%
Rio Tinto (RIO) 4,755.50p 1.06%
Antofagasta (ANTO) 1,116.50p 1.04%
Scottish Mortgage Inv Trust (SMT) 892.00p 0.79%
Glencore (GLEN) 171.82p 0.76%
BHP Group (BHP) 1,829.60p 0.75%
Persimmon (PSN) 2,552.00p 0.71%

FTSE 100 - Fallers

International Consolidated Airlines Group SA (CDI) (IAG) 185.55p -4.63%
Rolls-Royce Holdings (RR.) 249.40p -2.99%
ITV (ITV) 60.62p -2.67%
Informa (INF) 402.10p -2.43%
British Land Company (BLND) 359.10p -1.97%
BT Group (BT.A) 106.00p -1.90%
Whitbread (WTB) 2,402.00p -1.72%
WPP (WPP) 614.80p -1.63%
Melrose Industries (MRO) 101.10p -1.61%
Lloyds Banking Group (LLOY) 28.53p -1.47%

FTSE 250 - Risers

Cranswick (CWK) 4,014.00p 4.97%
Watches of Switzerland Group (WOSG) 319.50p 4.07%
Petropavlovsk (POG) 32.45p 2.85%
BMO Commercial Property Trust Limited (BCPT) 71.00p 2.45%
Hill & Smith Holdings (HILS) 1,366.00p 2.40%
Energean (ENOG) 619.00p 2.31%
Contour Global (GLO) 210.00p 1.94%
Plus500 Ltd (DI) (PLUS) 1,510.00p 1.82%
AJ Bell (AJB) 437.50p 1.74%
Kaz Minerals (KAZ) 576.00p 1.59%

FTSE 250 - Fallers

TUI AG Reg Shs (DI) (TUI) 299.60p -5.07%
Aston Martin Lagonda Global Holdings (AML) 65.80p -3.94%
Oxford Instruments (OXIG) 1,500.00p -3.85%
Coats Group (COA) 52.50p -3.85%
Carnival (CCL) 943.20p -3.60%
Micro Focus International (MCRO) 298.00p -3.56%
Avon Rubber (AVON) 3,410.00p -3.40%
Hammerson (HMSO) 49.35p -3.05%
Mitchells & Butlers (MAB) 165.60p -3.04%
SSP Group (SSPG) 233.40p -2.99%