London close: Stocks rise on UK GDP as investors await Fed

UK gross domestic product increased 0.6% in the three months to the end of June compared to the first quarter, according to a preliminary estimate from the Office for National Statistics, better than the forecast for a 0.4% rise.

Compared to the same period last year, GDP rose 2.2%, up from the 2% year-on-year growth in the first quarter and better than the 2.1% the market had expected as well as the best out-turn for four quarters.

The increase was largely due to an exceptional April performance across the economy, with the quarterly reading driven higher by a strong performance from industrial production, which enjoyed a quarterly increase of 2.1% to counteract the rest of the economy slowing.

“The monthly figures point to a significant loss of momentum through the quarter which means that the launchpad for Q3 was already soft, even before we factor in any Brexit effects," said Martin Beck, senior economic advisor to the EY ITEM Club, though he felt the economy may avoid a technical recession.

He added: “GDP growth in Q2 looks likely to represent one last hurrah for the economy before it enters a softer and more turbulent period. The lack of momentum as the economy entered Q3 means that the chances of a negative reading for the current quarter are relatively high.”

The pound dropped 0.02% against the dollar to $1.3128 at 1641 BST.

The attention now turns to the Federal Reserve’s policy announcement at 1900 BST. While the central bank is expected to keep interest rates unchanged, the market will be searching for clues in the policy statement on the timing of the next rate hike.

“I think that the Fed will likely stand by its desire to raise rates again this year, while highlighting the increased risk environment due to Brexit, which would probably suggest that it has again fallen back in line with the market and point to one hike in December,” said Craig Erlam, senior market analyst at Oanda.

Ahead of the decision, US data from the Commerce Department showed durable goods orders were down 4% on the previous month to $219.8bn following a 2.8% drop in May. Economists had been expecting a 1.1% drop.

US pending home sales rose a lot less than expected in June, according to data from the National Association of Realtors (NAR). The NAR’s monthly index rose 0.2% to 111.0 from 110.8 in May. Economists had been expecting a 1.4% increase.

On the company front, housebuilders rallied after positive statements from Rightmove and Taylor Wimpey. Rightmove posted a rise in first half pre-tax profit and expressed confidence over the full year despite Brexit while Taylor Wimpey said the EU referendum had not affected trading so far as it reported a 12% percent rise in first-half pre-tax profits to £267m.

ITV surged after reporting an increase in pre-tax profit in the first half and hiking the interim dividend.

Services group Capita fell after the company said the UK decision to leave the EU had increased uncertainty, particularly in the financial services sector, and it was “continuing to experience some delays in decision making in the short term”.

Shares in Bermuda-based insurance company Lancashire Holdings were down, despite profits falling less than feared in the first half as it skirted most of the significant industry losses in recent months.

Wealth management company Brewin Dolphin Holdings gained as it reported an increase in funds under management despite “challenging” investment markets.

Market Movers

FTSE 100 (UKX) 6,750.74 0.40%
FTSE 250 (MCX) 17,257.02 1.10%
techMARK (TASX) 3,453.18 0.70%

FTSE 100 - Risers

Taylor Wimpey (TW.) 155.30p 7.18%
Barratt Developments (BDEV) 432.90p 6.81%
ITV (ITV) 197.30p 6.76%
Persimmon (PSN) 1,681.00p 5.86%
Berkeley Group Holdings (The) (BKG) 2,680.00p 5.30%
Dixons Carphone (DC.) 353.20p 5.09%
Travis Perkins (TPK) 1,564.00p 4.20%
International Consolidated Airlines Group SA (CDI) (IAG) 416.40p 4.15%
St James's Place (STJ) 917.50p 3.79%
Lloyds Banking Group (LLOY) 55.95p 3.36%

FTSE 100 - Fallers

Hikma Pharmaceuticals (HIK) 2,561.00p -3.03%
Mediclinic International (MDC) 1,068.00p -1.75%
Provident Financial (PFG) 2,700.00p -1.75%
Paddy Power Betfair (PPB) 8,500.00p -1.68%
Imperial Brands (IMB) 3,942.00p -1.65%
GKN (GKN) 296.70p -1.43%
Capita (CPI) 975.00p -1.42%
Fresnillo (FRES) 1,846.00p -1.12%
Diageo (DGE) 2,138.00p -1.02%
Unilever (ULVR) 3,525.00p -0.87%

FTSE 250 - Risers

Brewin Dolphin Holdings (BRW) 261.60p 10.38%
Crest Nicholson Holdings (CRST) 440.00p 9.56%
Morgan Advanced Materials (MGAM) 275.60p 8.98%
Rightmove (RMV) 4,121.00p 8.73%
Metro Bank (MTRO) 2,068.00p 7.15%
Renishaw (RSW) 2,591.00p 7.07%
Redrow (RDW) 339.90p 6.82%
Vesuvius (VSVS) 353.50p 6.77%
Bellway (BWY) 2,075.00p 6.68%
Savills (SVS) 698.50p 6.32%

FTSE 250 - Fallers

Smurfit Kappa Group (SKG) 1,790.00p -3.08%
William Hill (WMH) 312.90p -2.83%
Essentra (ESNT) 630.50p -2.17%
Centamin (DI) (CEY) 153.20p -2.11%
Murray International Trust (MYI) 1,061.00p -1.94%
Dignity (DTY) 2,681.00p -1.94%
Lancashire Holdings Limited (LRE) 609.50p -1.85%
Jardine Lloyd Thompson Group (JLT) 966.00p -1.68%
RIT Capital Partners (RCP) 1,746.00p -1.58%
Drax Group (DRX) 341.60p -1.53%