London open: Stocks rise as investors digest GDP figures

London stocks rose in early trade on Friday following heavy losses in the previous session, as investors mulled the latest UK GDP figures.

At 0825 BST, the FTSE 100 was up 0.5% at 7,068.68, having slumped on Thursday amid a global selloff sparked by recovery concerns.

Data released earlier by the Office for National Statistics showed that economic growth slowed to 0.8% in May from a revised 2% in April, coming in well below expectations for 1.5% growth. April’s figure was revised down from 2.3%.

This marked the fourth consecutive month of growth and leaves the economy 3.1% below where it was in February 2020, before the Covid-19 pandemic hit.

The services sector was the biggest contributor, with growth of 0.9%, after indoor hospitality was allowed to reopen in May. Accommodation and food service activities grew by 37.1%.

The production sector saw growth of 0.8% in May, mainly because of adverse weather conditions boosting output in electricity, gas and air supply. Meanwhile, the construction sector contracted for the second month in a row, by 0.8%, but remains 0.3% above its pre-pandemic level.

The manufacturing of transport equipment fell by 16.5%, suffering its largest drop since April 2020 as microchip shortages disrupted car production.

ONS deputy national statistician for Economic Statistics Jonathan Athow said: "Pubs and restaurants, who were again able to welcome indoor guests, were responsible for the vast majority of the growth seen in May. Hotels also saw a marked recovery as restrictions lifted."

Paul Dales, chief UK economist at Capital Economics, said: "The muted increase in GDP in May is especially disappointing at a time when some more timely indicators suggest that the economic recovery lost a bit more verve in June. This may mean that the recent rise in Covid-19 cases and the delay to the final easing in Covid-19 restrictions is hampering the recovery.

"Of course, the pace of the recovery was always going to slow as the economy climbed back towards its pre-crisis level. But we hadn’t expected it to slow so much so soon. As such, whereas we previously thought that GDP would return to its pre-crisis peak in August, October now looks a better bet."

In equity markets, Vectura shares surged more than 12% after tobacco giant Philip Morris swooped for the UK pharmaceuticals company group with a £1.045bn recommended offer. The 150p-a-share offer trumps a 136p offer from private equity group Carlyle in May that valued Vectura, which focuses on inhaled medicines, at £958m.

Outsourcer Bunzl was sitting pretty at the top of the FTSE 100, boosted by an upgrade to ‘buy’ at Berenberg, which said the stock’s recent relative underperformance has run its course and the shares are "attractively valued".

British Airways and Iberia owner IAG, GKN owner Melrose, easyJet, Wizz Air and WH Smith were all higher after the government announced that fully-vaccinated Britons returning home from amber list countries will no longer have to self-isolate.

Broker Liberum said: "While this is arguably the biggest reduction in the UK’s international travel barriers, there remain obstacles from ongoing restrictions on UK residents entering many countries worldwide. Assuming the UK policy changes are not reversed, and are largely reciprocated by other countries, UK-exposed airlines are likely to have a reasonable opportunity to generate some cash for a short period this summer."

Elsewhere, polymer manufacturer Victrex was on the up after it said full-year results could be at the upper end of market expectations as it reported a rise in third-quarter revenue.

Market Movers

FTSE 100 (UKX) 7,068.68 0.54%
FTSE 250 (MCX) 22,721.46 0.30%
techMARK (TASX) 4,468.95 0.60%

FTSE 100 - Risers

Bunzl (BNZL) 2,534.00p 2.72%
Evraz (EVR) 598.80p 2.64%
Burberry Group (BRBY) 2,036.00p 2.47%
International Consolidated Airlines Group SA (CDI) (IAG) 185.58p 2.33%
Ocado Group (OCDO) 1,923.00p 1.75%
Antofagasta (ANTO) 1,436.50p 1.38%
Persimmon (PSN) 2,962.00p 1.33%
Melrose Industries (MRO) 156.95p 1.29%
Rolls-Royce Holdings (RR.) 102.02p 1.29%
Land Securities Group (LAND) 675.80p 1.23%

FTSE 100 - Fallers

Halma (HLMA) 2,752.00p -0.43%
HSBC Holdings (HSBA) 408.95p -0.40%
B&M European Value Retail S.A. (DI) (BME) 546.40p -0.40%
Just Eat Takeaway.Com N.V. (CDI) (JET) 6,703.00p -0.18%
Royal Dutch Shell 'B' (RDSB) 1,422.80p -0.14%
Weir Group (WEIR) 1,838.00p -0.11%
SSE (SSE) 1,526.00p -0.10%
Sainsbury (J) (SBRY) 283.60p -0.07%
Royal Dutch Shell 'A' (RDSA) 1,459.00p -0.07%
National Grid (NG.) 935.30p -0.03%

FTSE 250 - Risers

Vectura Group (VEC) 152.20p 12.24%
CMC Markets (CMCX) 476.50p 4.73%
Rank Group (RNK) 179.80p 4.17%
WH Smith (SMWH) 1,677.50p 3.39%
IWG (IWG) 318.20p 2.05%
easyJet (EZJ) 935.60p 2.03%
Aston Martin Lagonda Global Holdings (AML) 1,878.00p 1.79%
Hammerson (HMSO) 37.97p 1.58%
Meggitt (MGGT) 440.30p 1.45%
Vivo Energy (VVO) 100.60p 1.31%

FTSE 250 - Fallers

Watches of Switzerland Group (WOSG) 826.00p -4.51%
4Imprint Group (FOUR) 2,550.00p -1.73%
Oxford Instruments (OXIG) 2,380.00p -1.24%
Sirius Real Estate Ltd. (SRE) 114.60p -1.21%
CLS Holdings (CLI) 250.50p -0.99%
888 Holdings (888) 374.60p -0.79%
C&C Group (CDI) (CCR) 234.00p -0.68%
Wood Group (John) (WG.) 213.30p -0.65%
AJ Bell (AJB) 415.20p -0.62%
Network International Holdings (NETW) 355.00p -0.50%