London midday: Stocks extend gains as pound drops on GDP revision

London stocks were looking like finishing the week on a high as the pound lost ground after UK economic growth was revealed to have slowed to a four-year low in the second quarter and the current account deficit widened.

The FTSE 100 was up 0.7% to 7,371.52, while the pound was down 0.4% versus the dollar at 1.3386, with hawkish comments from Bank of England governor Mark Carney failing to lift the currency after the release of disappointing data.

"We can see that in the coming months if the economy continues on this track it may be appropriate to raise interest rates," Carney told the BBC. "If the economy continues on the track that it's been on, and all indications are that it is, in the relatively near term we can expect that interest rates will increase."

Meanwhile, the latest figures from the Office for National Statistics showed gross domestic product for the second quarter of 2017 was up only 1.5% compared to the corresponding period last year, down from the initial estimate of 1.7% and the lowest annual growth in fourth years.

However, the ONS said that compared to the first quarter of this year, the second quarter's growth remained at 0.3%, as expected.

Within the second quarter there were encouraging signs, with quarterly growth in household spending revised up to 0.2% from 0.1%, and business investment to 0.5% from 0%.

While the services sector was the only positive contribution to growth in the second quarter, the ONS revealed that the index of services decreased 0.2% during July, mostly from the transport, storage and communication sector.

National accounts data from the ONS revealed the household saving ratio picked up to 5.4% in the second quarter, the highest since the third quarter of last year, while the ratio for the first quarter was revised to 3.8% from 1.7% as part of a methodology change that saw the household saving ratio revised up on average by 0.9 percentage points between 1997 and 2016.

The current account deficit widened to 4.6% from 4.4% between the first and second quarter of 2017.

IG analyst Joshua Mahony said: “The UK economy has been the focus of market attention today, as a hawkish Mark Carney, coupled with a negative revision to the Q2 GDP reading have made for a volatile morning for the pound. Carney has laid out in pretty unambiguous terms that a rate rise could not be far away, with markets now assigning a 76.5% likeliness to a November hike.

"With elevated market expectations of a year-end BoE (81%) and Fed (67%) rate rise, along with the potential for an ECB taper, the fourth quart looks to be one which is dominated by monetary tightening.”

Market participants were also digesting the latest survey from GfK, with its consumer confidence index rising a point to -9, up from a negative balance of -10 in August and building on an upward shift of two points in July.

Confidence in personal finances, current and future, slipped this month but retail sales in the UK continue to grow despite non-food prices increasing at their highest rate for 25 years, said GfK's head of market dynamics, Joe Staton.

"Consumers appear to be in a mixed mood – with some confidence measures up and others down – yet there’s a strong note of defiance," Staton said.

Homeowners were mulling over the latest survey from Nationwide, which showed price growth in the UK remained broadly stable in September, but prices in London fell for the first time in eight years.

The annual rate of house price growth remained broadly stable in September at 2.0%, compared with 2.1% in August, beating expectations for a 1.9% increase. However, London prices were down 0.6% year-on-year, making the capital the weakest performing region for the first time since 2005.

On the month, UK house prices grew 0.2% compared with a 0.1% decline in August, beating expectations for a 0.1% gain.

In corporate news, insurer Beazley was on the front foot after saying early estimates of the net cost of Atlantic hurricanes Harvey, Irma and Maria and earthquakes in Mexico was $175m - $275m (£130m - £205m) and would cut 2017 earnings by about $150m.

ITV was boosted by an upgrade to ‘overweight’ at Barclays, while QinetiQ surged after it issued a short trading update before entering its closed period for the half year to 30 September, confirming trading was in line with expectations and the outlook for overall group performance this financial year was unchanged.

Aviva advanced as it agreed to sell its stake in Italian joint venture Avipop Assicurazioni to Banco BPM for €265m (£233m) in cash, while Sanne rallied after entered into an agreement to buy Luxembourg Investment Solutions (LIS) and Compliance Partners for up to €100m.

John Laing edged up after it announced a further wind farm investment in the state of Texas, and its third investment in the renewable energy sector in the US.

Pennon and Laing were also in focus as they said the Greater Manchester agreement has now been signed.

On the downside, Carillion shares tumbled after the construction and outsourcing group warned that full-year results would be below market forecasts as it posted a first-half loss of £1.2bn compared to a profit of £84m the year before.

Sirius Minerals retreated despite saying it remains on time and on budget as it develops its massive Woodsmith polyhalite fertiliser mine under the Yorkshire Moors.

Market Movers

FTSE 100 (UKX) 7,371.52 0.67%
FTSE 250 (MCX) 19,812.06 0.68%
techMARK (TASX) 3,486.90 0.80%

FTSE 100 - Risers

ITV (ITV) 173.60p 2.90%
easyJet (EZJ) 1,228.00p 2.25%
Anglo American (AAL) 1,333.00p 2.15%
Persimmon (PSN) 2,581.00p 2.06%
Smith & Nephew (SN.) 1,356.00p 1.95%
Burberry Group (BRBY) 1,766.00p 1.90%
Rio Tinto (RIO) 3,475.50p 1.71%
Whitbread (WTB) 3,763.00p 1.62%
Antofagasta (ANTO) 943.50p 1.62%
United Utilities Group (UU.) 858.00p 1.54%

FTSE 100 - Fallers

Hargreaves Lansdown (HL.) 1,465.00p -2.14%
3i Group (III) 914.50p -0.22%
Barclays (BARC) 191.90p -0.16%
Sky (SKY) 914.00p -0.11%
Imperial Brands (IMB) 3,170.00p -0.06%
InterContinental Hotels Group (IHG) 3,933.00p -0.00%
Associated British Foods (ABF) 3,190.00p 0.00%
Convatec Group (CTEC) 273.20p 0.04%
Centrica (CNA) 187.10p 0.05%
Lloyds Banking Group (LLOY) 67.26p 0.06%

FTSE 250 - Risers

QinetiQ Group (QQ.) 249.70p 6.98%
Sanne Group (SNN) 807.00p 6.18%
Syncona Limited NPV (SYNC) 189.00p 6.00%
Kaz Minerals (KAZ) 758.00p 3.69%
Crest Nicholson Holdings (CRST) 543.50p 3.62%
Rank Group (RNK) 218.10p 3.56%
Hochschild Mining (HOC) 227.30p 3.51%
Beazley (BEZ) 475.20p 3.37%
CLS Holdings (CLI) 204.50p 3.23%
Evraz (EVR) 312.00p 3.07%

FTSE 250 - Fallers

Rotork (ROR) 258.00p -1.98%
GCP Infrastructure Investments Ltd (GCP) 125.50p -1.65%
Hunting (HTG) 477.40p -1.36%
Balfour Beatty (BBY) 268.30p -1.32%
HICL Infrastructure Company Ltd (HICL) 155.00p -1.27%
TR Property Inv Trust (TRY) 359.40p -1.26%
P2P Global Investments (P2P) 802.00p -0.93%
John Laing Infrastructure Fund Ltd (JLIF) 128.80p -0.92%
Tullow Oil (TLW) 187.10p -0.85%
International Public Partnerships Ltd. (INPP) 157.50p -0.82%