London midday: Stocks extend gains as investors shrug off GDP

London stocks had extended gains by midday on Wednesday as investors took dire UK GDP figures in their stride.

The FTSE 100 was up 0.9% at 6,212.49, while sterling was flat against the dollar at 1.3044.

Data released earlier by the Office for National Statistics showed the economy shrank by a fifth in the second quarter of 2020 as the country sank into the deepest recession on record because of the Covid-19 crisis.

Gross domestic product dropped 20.4% in the three months to the end of June from the previous quarter. This was bigger than reported to date by any EU member and double the fall recorded in the US. The record drop, broadly in line with expectations, was caused by the near shutdown of the economy from late March as the government sought to stem the spread of coronavirus.

The second-quarter plunge followed a 2.2% contraction in the first three months of 2020 which covered the early stages of the virus's spread in the UK and the start of the economic shutdown.

Markets participants appeared to be taking heart from the June figures, which showed that GDP increased 8.7% as shops, factories and construction sites started to reopen, although the economy is still 17.2% smaller than before the virus hit the UK.

Laura Suter, personal finance analyst at investment platform AJ Bell, said the data for June "is key, as we all knew that lockdown measures would have a big impact on the economy but what we still don’t know is how quickly the UK will rebound".

She said the 8.7% growth is encouraging, "albeit this is coming from a very low base after the falls in May and still sits far below the pre-Covid figures from February".

"But July figures are expected to be more positive still, as more businesses re-opened and people emerged from their houses to start spending."

In equity markets, Admiral rallied as the insurer reinstated its special dividend and reported a better-than-expected jump in first-half pre-tax profit after motor claims fell as drivers stayed home during lockdown.

Just Eat Takeaway was also in the black as first-half earnings and revenue grew as it benefited from lockdowns.

M&G gained as it said first-half profit more than halved but a chunky interim dividend pleased investors.

On the downside, Spirax-Sarco fell as it said organic revenue growth in the second half of the year will be lower than it anticipated in May.

Avast was weaker even as the cybersecurity firm said full-year organic revenue should be at the upper end of forecasts as it reported a strong first half driven by more people working from home during lockdown.

In broker note action, shares of British Airways and Iberia parent IAG flew lower after a downgrade to ‘neutral’ at Davy, while Dunelm was boosted by an initiation at ‘overweight’ by Barclays.

Market Movers

FTSE 100 (UKX) 6,212.49 0.94%
FTSE 250 (MCX) 17,978.26 -0.11%
techMARK (TASX) 3,903.08 -0.05%

FTSE 100 - Risers

Admiral Group (ADM) 2,653.00p 5.07%
Just Eat Takeaway.Com N.V. (CDI) (JET) 9,024.00p 3.99%
HSBC Holdings (HSBA) 358.15p 3.51%
Standard Chartered (STAN) 440.80p 2.97%
Barratt Developments (BDEV) 513.80p 2.84%
Severn Trent (SVT) 2,521.00p 2.27%
Taylor Wimpey (TW.) 119.90p 2.26%
M&G (MNG) 177.50p 2.22%
United Utilities Group (UU.) 910.60p 2.18%
National Grid (NG.) 906.00p 2.05%

FTSE 100 - Fallers

Avast (AVST) 566.50p -5.58%
Land Securities Group (LAND) 573.20p -2.12%
Spirax-Sarco Engineering (SPX) 10,445.00p -2.02%
Compass Group (CPG) 1,222.50p -1.41%
Coca-Cola HBC AG (CDI) (CCH) 2,122.00p -1.39%
International Consolidated Airlines Group SA (CDI) (IAG) 216.30p -1.10%
Aveva Group (AVV) 4,499.00p -1.01%
DCC (DCC) 6,912.00p -0.83%
Phoenix Group Holdings (PHNX) 717.80p -0.66%
British Land Company (BLND) 376.80p -0.66%

FTSE 250 - Risers

AO World (AO.) 196.60p 7.08%
Dunelm Group (DNLM) 1,374.00p 4.65%
FirstGroup (FGP) 45.98p 4.41%
Just Eat Takeaway.Com N.V. (CDI) (JET) 9,024.00p 3.99%
Petropavlovsk (POG) 31.90p 3.91%
IG Group Holdings (IGG) 779.00p 3.59%
Contour Global (GLO) 209.00p 3.47%
Close Brothers Group (CBG) 1,201.00p 3.45%
Just Group (JUST) 52.15p 3.27%
Fisher (James) & Sons (FSJ) 1,230.00p 2.84%

FTSE 250 - Fallers

Trainline (TRN) 381.00p -5.55%
Capital & Counties Properties (CAPC) 134.40p -4.68%
Energean (ENOG) 600.00p -4.61%
Shaftesbury (SHB) 546.50p -4.46%
Balfour Beatty (BBY) 251.60p -3.90%
Apax Global Alpha Limited (APAX) 156.20p -3.58%
TUI AG Reg Shs (DI) (TUI) 369.40p -3.45%
Aston Martin Lagonda Global Holdings (AML) 70.50p -3.42%
Future (FUTR) 1,434.00p -3.24%
Spirent Communications (SPT) 291.50p -3.16%