London midday: Stocks push higher as pound plunges on weak GDP

London stocks had extended gains by midday on Friday as the pound fell below $1.38 for the first time since the start of March on the back of weak UK growth figures.

The FTSE 100 was up 0.6% to 7,468.93, as the pound slumped 0.9% against the dollar to 1.3797 and 0.8% versus the euro to 1.1409 after data from the Office for National Statistics showed that first-quarter economic growth was the worst in more than five years, undermining the case for a Bank of England rate hike next month.

Gross domestic product grew just 0.1% in the first three months of the year compared to the preceding month, down sharply from the 0.4% in the fourth quarter and much worse the 0.3% expected by the market.

This initial estimate from the ONS showed the UK economy growing at its slowest pace since the end of 2012 due to a significant fall in construction output, weaker manufacturing growth and continued subdued growth for consumer-facing services. While industrial production growth accelerated to 0.7% from 0.4%, construction fell outright 3.3% and services sector growth slowed to 0.3% from 0.4%.

Snow and other bad weather from the 'Beast from the East' during the quarter had a relatively small overall impact across the UK. "While the snow had some impact on the economy, particularly in construction and some areas of retail, its overall effect was limited with the bad weather actually boosting energy supply and online sales," said Rob Kent-Smith, the ONS's head of national accounts.

Compared with the same quarter a year ago, the economy grew 1.2%, well below its five-year average of 2.2% and the slowest rate in almost six years.

Such a poor GDP reading cast further doubts on the health of the economy, said economist Chris Williamson at IHS Markit, and "seriously knocking the case" for what had been seen by many as a likely BoE interest rates hike in May.

Earlier, the latest survey from mortgage lender Nationwide showed that house price growth picked up this month.

Annual house price growth rose to 2.6% from 2.1% in March, in line with expectations. On the month, house prices were up 0.2% in April versus a 0.2% drop the month before, as expected.

Nationwide’s chief economist Robert Gardner said: "Looking ahead, much will depend on how broader economic conditions evolve, especially in the labour market, but also with respect to interest rates. Subdued economic activity and the ongoing squeeze on household budgets is likely to continue to exert a modest drag on housing market activity and house price growth this year. We continue to expect house prices to rise by around 1% over the course of 2018."

Meanwhile, UK consumer confidence as measured by GfK declined by two points in April to -9, with four of the five measures lower, despite wage growth having recently overtaken inflation.

Joe Staton, director of client strategy at GfK, said: "We now have 28 consecutive months without a positive overall index score. The last positive was in January 2016. Hope springs eternal for better numbers but the continued uncertain economic forecast means that the sun is not yet shining brightly for UK consumers."

In corporate news, Royal Bank of Scotland Group fell as it reported a threefold increase in first quarter net profits as the cost of restructuring and litigation fell, but there remains a looming threat of a sizeable penalty from US authorities.

Merlin Entertainments rallied as it said group trading at the current "seasonally quiet" point of the year was in line with expectations, and consistent with the guidance provided on 1 March, while Computacenter rose after hailing a better-than-expected first quarter, with revenue up 23%.

Defence company Ultra Electronics ticked higher after reiterating that it expects to make "modest" progress in constant currency underlying revenue and operating profit this year, and that the cash performance will be more heavily weighted to the second half.

Wealth manager Brewin Dolphin dropped after announcing that finance director Andrew Westenberger will step down next month "by mutual agreement to pursue other interests".

Builders’ merchant Travis Perkins nudged down despite maintaining its full-year outlook and posting a jump in first-quarter sales.

On the broker note front, Barclays upgraded Ashmore to ‘overweight’ from ‘equalweight’ but cut Jupiter Fund Management to ‘underweight’ from ‘equalweight’.

EasyJet was up as RBC Capital hiked its earnings estimates and target price, while Vesuvius was lifted to ‘buy’ from ‘hold’ at Investec.

Market Movers

FTSE 100 (UKX) 7,468.93 0.64%
FTSE 250 (MCX) 20,252.56 0.57%
techMARK (TASX) 3,434.22 0.78%

FTSE 100 - Risers

Scottish Mortgage Inv Trust (SMT) 471.80p 2.34%
Rentokil Initial (RTO) 303.70p 2.26%
WPP (WPP) 1,152.50p 1.99%
Imperial Brands (IMB) 2,586.00p 1.77%
DCC (DCC) 6,860.00p 1.63%
Pearson (PSON) 822.80p 1.61%
Taylor Wimpey (TW.) 193.05p 1.58%
Fresnillo (FRES) 1,270.50p 1.56%
Smith (DS) (SMDS) 521.60p 1.56%
Johnson Matthey (JMAT) 3,283.00p 1.55%

FTSE 100 - Fallers

Royal Bank of Scotland Group (RBS) 267.30p -1.87%
Smurfit Kappa Group (SKG) 3,012.00p -1.38%
Vodafone Group (VOD) 209.80p -0.94%
Barclays (BARC) 208.05p -0.93%
Lloyds Banking Group (LLOY) 64.46p -0.68%
Glencore (GLEN) 367.75p -0.62%
BHP Billiton (BLT) 1,527.80p -0.55%
Antofagasta (ANTO) 946.40p -0.50%
Kingfisher (KGF) 302.60p -0.36%
Rolls-Royce Holdings (RR.) 840.53p -0.22%

FTSE 250 - Risers

Merlin Entertainments (MERL) 362.20p 4.47%
BTG (BTG) 679.00p 3.27%
Computacenter (CCC) 1,264.00p 3.10%
Spire Healthcare Group (SPI) 235.00p 2.62%
Hastings Group Holdings (HSTG) 277.60p 2.36%
Inmarsat (ISAT) 378.70p 2.35%
Petrofac Ltd. (PFC) 611.91p 2.33%
Sports Direct International (SPD) 408.00p 2.28%
Aveva Group (AVV) 2,146.00p 2.19%
Hikma Pharmaceuticals (HIK) 1,288.50p 2.18%

FTSE 250 - Fallers

Ferrexpo (FXPO) 233.90p -2.34%
Kaz Minerals (KAZ) 897.00p -2.10%
Drax Group (DRX) 312.16p -2.02%
Brewin Dolphin Holdings (BRW) 357.60p -1.60%
Virgin Money Holdings (UK) (VM.) 268.00p -1.54%
Just Group (JUST) 141.00p -1.26%
Weir Group (WEIR) 2,151.00p -1.24%
Howden Joinery Group (HWDN) 475.50p -1.14%
TBC Bank Group (TBCG) 1,806.00p -0.99%
Diploma (DPLM) 1,205.00p -0.99%