London midday: Stocks and pound both drop as GDP disappoints; Barclays rallies

London stocks were still in the red by midday on Thursday even as the pound lost ground after disappointing economic growth figures, as investors digested hawkish Federal Reserve minutes and waded through a deluge of corporate releases.

The FTSE 100 was down 0.9% to 7,218.95, having opened in the red on the back of a weak performance in the US and Asia after minutes from the US central bank's meeting at the end of last month pointed to at least three rate hikes this year. Although this more or less priced in, the potential for a fourth hike was keeping investors on edge.

Meanwhile, the pound fell back 0.4% against the dollar and the euro to 1.3864 and 1.1286 after UK gross domestic product growth for the final quarter of 2017 was revised down. Market analysts also argued that sterling was being knocked lower by a stronger dollar, which rose in tandem with US Treasury yields on the back of the Fed minutes.

Figures from the Office for National Statistics showed that GDP growth rose just 0.4% in the fourth quarter compared to the third, down from an initial estimate of 0.5%, meaning year-on-year growth was cut to 1.4% from 1.5%. This put the UK back at the bottom of the G7 growth leaderboard for 2017.

The 0.1 percentage point revision down from the preliminary estimate was partly due to a downward revision to the estimated output of the production and services industries, ONS said, revealing a disappointing expenditure component mix. Business investment was flat, consumer spending growth slowed to 0.3% compared to the prior quarter and net trade subtracted 0.5 percentage points as exports fell 0.2% and imports rose 1.5%.

Howard Archer, chief economist advisor at the EY Item Club, said: "The downward revision to UK GDP growth may dilute expectations that the Bank of England will raise interest rates in May, but we suspect that the MPC remains more likely than not to act then.

"With the Bank of England keen to gradually normalise monetary policy and the economy likely to see essentially stable growth during 2018, we expect two interest rate hikes this year in May and November. This also assumes that earnings growth will trend up gradually."

Retail sales were also in focus following the release of the latest quarterly distributive trades survey from the Confederation of British Industry.

Sales growth slowed for the third month in a row, with 32% of respondents reporting a rise in sales volumes from a year ago and 24% reporting a drop, giving a retail sales balance of +8. This was down from +12 in January and missed expectations for a nudge up to +13.

Still, the survey also found that most retailers expect volumes to increase next month, with 34% seeing a jump and 13% expecting a decline. This gave a balance of +21 compared to +13 in January.

Investment intentions also strengthened, climbing to their highest level since August 2015.

In corporate news, British American Tobacco retreated even as it reported on what it claimed was a record year, with its "transformational" acquisition of Reynolds American leading to a 37.6% surge in revenue to £20.29bn.

Analyst Mike Van Dulken at Accendo Markets noted that revenues missed consensus of £20.6bn, pre-tax income was either a beat on an adjusted basis or bang in-line when adjusted for constant currencies. The real problem, however, he said was volumes falling 2.6% when excluding Reynolds, together with comments about a challenging trading environment.

BAE Systems was weaker after saying it expects profits for 2018 to be flat, while Anglo American dropped even as it reported a 45% jump in full-year earnings before interest, tax, depreciation and amortisation thanks to higher commodity and copper prices.

Moneysupermarket.com tumbled 16% as its full-year earnings and revenue missed expectations and investors were left disappointed by the 2018 outlook, while Hays fell even as the FTSE 250 recruiter said interim profit rose 18% on the back of strong growth in its international markets and good cost control in the UK.

Kaz Minerals was in the red despite reporting a rise in full-year profit as its numbers missed across the board.

Safestore was on the back foot as it reported a 9.8% rise in first-quarter revenues, while gambling software development company Playtech tanked 10% after its full-year results fell short, with growth rates slowing from 2016.

Bucking the trend, Barclays rallied as it declared its intention to more than double dividend payouts in 2018 to 6.5p per share after lower costs helped lift profits last year.

Centrica rose despite reporting a 17% drop in full-year adjusted operating profits, as investors welcomed a steady dividend, an increase to the cost efficiency programme and signs that management will be more focused on turning around the overall performance.

RSA Insurance gained as it posted a jump in full-year profit and bumped up its dividend as a strong performance in Scandinavia, Canada, the Middle East and Ireland helped to offset a poor showing the UK.

Serco racked up strong gains as the outsourcer's 2017 results beat analysts' expectations and transport group Go-Ahead surged as its first-half operating profit beat forecasts.

GlaxoSmithKline, Diageo, Carnival, HSBC and Imperial Brands were among the companies whose stock went ex-dividend.

In broker note action, Rotork and Weir were lifted to 'hold' from 'underperform' at Jefferies, while TalkTalk was cut to 'hold' from 'buy' at HSBC.

Market Movers

FTSE 100 (UKX) 7,218.95 -0.86%
FTSE 250 (MCX) 19,681.78 -0.54%
techMARK (TASX) 3,330.41 -0.49%

FTSE 100 - Risers

Barclays (BARC) 212.00p 4.90%
Centrica (CNA) 137.30p 3.86%
RSA Insurance Group (RSA) 633.00p 3.26%
Admiral Group (ADM) 1,920.30p 1.23%
Shire Plc (SHP) 3,022.50p 1.02%
International Consolidated Airlines Group SA (CDI) (IAG) 620.20p 0.55%
Royal Bank of Scotland Group (RBS) 278.75p 0.49%
Whitbread (WTB) 3,951.00p 0.41%
Pearson (PSON) 704.20p 0.40%
Direct Line Insurance Group (DLG) 391.20p 0.33%

FTSE 100 - Fallers

British American Tobacco (BATS) 4,252.50p -4.44%
Imperial Brands (IMB) 2,578.00p -3.30%
BAE Systems (BA.) 585.40p -2.66%
Anglo American (AAL) 1,754.40p -2.35%
HSBC Holdings (HSBA) 730.10p -2.30%
ITV (ITV) 168.45p -2.21%
Barratt Developments (BDEV) 555.80p -2.04%
Mediclinic International (MDC) 593.40p -1.92%
GlaxoSmithKline (GSK) 1,299.66p -1.88%
Mondi (MNDI) 1,893.50p -1.71%

FTSE 250 - Risers

Go-Ahead Group (GOG) 1,530.98p 14.42%
AA (AA.) 88.67p 6.09%
Serco Group (SRP) 95.70p 5.22%
Vectura Group (VEC) 77.05p 3.70%
Stagecoach Group (SGC) 137.50p 3.23%
BCA Marketplace (BCA) 167.40p 2.83%
Mitie Group (MTO) 162.00p 2.66%
Ocado Group (OCDO) 518.80p 2.49%
Capita (CPI) 175.35p 2.39%
CLS Holdings (CLI) 230.50p 1.99%

FTSE 250 - Fallers

Moneysupermarket.com Group (MONY) 273.40p -16.85%
Playtech (PTEC) 699.80p -9.63%
Acacia Mining (ACA) 141.00p -6.78%
Spire Healthcare Group (SPI) 237.00p -3.89%
Hays (HAS) 196.70p -3.86%
Cineworld Group (CINE) 231.90p -3.70%
Jupiter Fund Management (JUP) 530.00p -3.14%
Capital & Counties Properties (CAPC) 264.10p -2.98%
Sanne Group (SNN) 589.00p -2.97%
Inmarsat (ISAT) 446.70p -2.68%