London close: Markets finish higher as UK avoids recession
London stocks finished a solid afternoon in the green on Thursday, as investors had their recession fears allayed by the latest economic growth figures, and a strong showing from the mining sector also lending support.
The FTSE 100 closed 0.28% higher at 7,186.36, and the broader FTSE 250 was 0.33% firmer at 19,235.72.
It was a reversal of the morning’s fortunes for the top-flight index, after data from the Office for National Statistics showed the economy unexpectedly contracted in August, but grew over the three-month period, meaning a recession is likely to be avoided.
Gross domestic product contracted 0.1% in August compared to an upwardly revised 0.4% jump in July, missing expectations for a flat reading, while July's growth was revised up from 0.3%.
However, in the three months to the end of August, the economy grew 0.3%, up from a 0.1% increase in the previous three-month period and well above the 0.1% growth consensus forecast.
Services output grew 0.4%, making for the strongest rise since March.
Manufacturing production was down 0.7% on the month in August compared to a revised 0.4% rise the month before and expectations of a flat reading.
Industrial production declined 0.6% on the month in August compared to a 0.1% increase in July and expectations of a 0.1% dip.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the revisions painted the economy’s recent performance in a better light, undermining the case for the Monetary Policy Committee to rush ahead and cut interest rates before the Brexit path was known.
"Once again, the 'hard' data suggest that business surveys pointing to recession should be down-weighted while the Brexit crisis is brewing.
“We continue to expect the economy to hold up better than the MPC expects over the remainder of this year, dissuading the Committee from cutting Bank Rate merely to offset the uncertainty about Brexit," he said.
Sterling was enjoying a decent Thursday afternoon as well, and was last up 1.31% against the dollar at $1.2366 and 0.92% on the euro at €1.1226.
Looking beyond British shores, however, investors were growing increasingly nervous ahead of high-level trade talks between the US and China in Washington later in the day, following conflicting reports about the progress being made.
“We're getting very mixed messages from the trade talks this week, with some even suggesting the Chinese delegation may return to Beijing 24 hours earlier than planned,” said Oanda analyst Craig Erlam.
“That doesn't exactly fill you with hope that a deal, limited or comprehensive, is imminent.
"Still, traders will be monitoring the progress extremely closely with market sentiment being closely tied to the talks.”
Erlam noted reports that China had offered to increase soybean purchases in an attempt to thaw relations between the two countries was clearly positive, as were reports that the US was prepared to grant licences to allow US firms to trade with Huawei.
That still did not resolve the deep divides that clearly existed on certain issues, he added making a deal in the foreseeable future unlikely.
In equity markets, miners rallied amid rising copper and iron ore prices, with Glencore up 3.18%, Antofagasta rising 4.47%, Anglo American adding 3.98%, and BHP 1.96% firmer.
Burberry gave up some of its earlier gains, but still finished up 0.69% after French luxury brand LVMH posted an 11% increase in third-quarter revenue.
Paper and packaging group Mondi pared back its morning losses and broke through the waterline in the afternoon, to finish up 2.01%.
It had reported an 18% fall in third-quarter core earnings year-on-year at the open, as demand remained soft and prices weakened compared with the first half of the year.
Peer DS Smith also reversed its losses, finishing 1.13% higher.
Hargreaves Lansdown was 2.11% lower after saying that new business in the period from 1 July to 30 September was hit by weak investor sentiment on the back of Brexit uncertainty.
Dunelm plunged 10.37% after the homeware retailer said first-quarter like-for-like sales rose 6.4%, down a touch from 7.7% the previous quarter.
Barratt Developments had a late session resurgence to rise 2.48%, as did Tesco to add 1.22% and Close Brothers managing gains of 1.91%, despite the stocks going ex-dividend, while HSBC remained below the waterline to finish down 1.09%.
FTSE 100 - Risers
Antofagasta (ANTO) 864.00p 4.47%
Anglo American (AAL) 1,923.60p 3.98%
Lloyds Banking Group (LLOY) 52.67p 3.89%
BT Group (BT.A) 184.86p 3.87%
Kingfisher (KGF) 192.80p 3.71%
Persimmon (PSN) 2,063.00p 3.51%
Prudential (PRU) 1,440.00p 3.41%
Glencore (GLEN) 232.00p 3.18%
Royal Bank of Scotland Group (RBS) 195.85p 3.02%
Melrose Industries (MRO) 195.80p 2.97%
FTSE 100 - Fallers
Legal & General Group (LGEN) 210.70p -9.80%
Barratt Developments (BDEV) 587.20p -3.64%
Fresnillo (FRES) 653.60p -2.36%
Hargreaves Lansdown (HL.) 1,779.00p -2.06%
Centrica (CNA) 66.70p -1.91%
Experian (EXPN) 2,508.00p -1.80%
Just Eat (JE.) 621.40p -1.58%
Polymetal International (POLY) 1,158.00p -1.40%
Unilever (ULVR) 4,779.50p -1.25%
3i Group (III) 1,059.50p -1.17%
FTSE 250 - Risers
CYBG (CYBG) 111.15p 6.47%
Finablr (FIN) 147.20p 4.99%
Kaz Minerals (KAZ) 408.30p 4.61%
Vivo Energy (VVO) 119.60p 4.18%
Premier Oil (PMO) 75.86p 3.86%
Cairn Energy (CNE) 187.00p 3.54%
Airtel Africa (AAF) 52.75p 3.53%
IP Group (IPO) 59.50p 3.30%
Sophos Group (SOPH) 423.70p 3.29%
Mediclinic International (MDC) 331.70p 3.24%
FTSE 250 - Fallers
Dunelm Group (DNLM) 724.00p -11.17%
Sirius Minerals (SXX) 3.43p -7.24%
AJ Bell (AJB) 348.00p -4.13%
FDM Group (Holdings) (FDM) 647.00p -4.01%
Hochschild Mining (HOC) 176.40p -3.55%
Aston Martin Lagonda Global Holdings (AML) 422.70p -3.34%
Greggs (GRG) 1,749.00p -2.67%
Dechra Pharmaceuticals (DPH) 2,550.00p -2.52%
Centamin (DI) (CEY) 114.00p -2.52%
Mercantile Investment Trust (The) (MRC) 198.33p -2.30%