London midday: Stocks pare losses after GDP data; miners rally
London stocks had pared losses by midday on Thursday as the latest economic growth figures assuaged concerns about a recession, with a strong showing from the mining sector also lending support.
The FTSE 100 was down just 0.1% at 7,160.87, off earlier lows 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. 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 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 0.1% increase in July and expectations of a 0.1% dip.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said revisions paint 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 is 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 up 0.3% against the dollar at 1.2244 and 0.2% lower versus the euro at 1.1105.
More broadly, 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.
Oanda analyst Craig Erlam said: "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. 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. Reports that China has offered to increase soybean purchases in an attempt to thaw relations between the two countries is obviously a positive, as are reports that the US is prepared to grant licences to allow US firms to trade with Huawei."
Erlam said that while goodwill gestures are "great", they don't resolve the deep divides that clearly exist on certain issues, making a deal in the foreseeable future unlikely.
In equity markets, miners rallied amid rising copper and iron ore prices, with Glencore, Antofagasta, Anglo American and BHP all higher.
Burberry was on the rise after French luxury brand LVMH posted an 11% increase in third-quarter revenue.
Paper and packaging group Mondi lost ground as it said third-quarter core earnings fell 18% year-on-year as demand remained soft and prices weakened compared with the first half of the year. Peer DS Smith was also weaker.
Hargreaves Lansdown traded 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 slumped 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, Tesco, HSBC and Close Brothers were all in the red as their stock went ex-dividend.
FTSE 100 - Risers
Anglo American (AAL) 1,894.60p 2.41%
Prudential (PRU) 1,424.50p 2.30%
Glencore (GLEN) 229.90p 2.25%
Antofagasta (ANTO) 845.00p 2.18%
BT Group (BT.A) 181.40p 1.92%
Burberry Group (BRBY) 2,072.00p 1.87%
Kingfisher (KGF) 189.10p 1.72%
CRH (CRH) 2,679.69p 1.46%
Melrose Industries (MRO) 192.80p 1.39%
Legal & General Group (LGEN) 236.75p 1.35%
FTSE 100 - Fallers
Barratt Developments (BDEV) 574.40p -5.74%
Smith (DS) (SMDS) 327.75p -2.86%
Tesco (TSCO) 221.80p -2.42%
Mondi (MNDI) 1,509.50p -2.36%
Hargreaves Lansdown (HL.) 1,775.00p -2.28%
Fresnillo (FRES) 654.65p -2.20%
Intertek Group (ITRK) 5,242.00p -1.87%
Aveva Group (AVV) 3,616.00p -1.79%
Centrica (CNA) 66.86p -1.68%
Ocado Group (OCDO) 1,273.39p -1.63%
FTSE 250 - Risers
Finablr (FIN) 145.60p 3.85%
CYBG (CYBG) 108.40p 3.83%
Kaz Minerals (KAZ) 405.10p 3.79%
Airtel Africa (AAF) 52.15p 2.36%
Energean Oil & Gas (ENOG) 914.00p 2.24%
Hays (HAS) 141.50p 1.65%
Hill & Smith Holdings (HILS) 1,217.00p 1.59%
Card Factory (CARD) 157.30p 1.55%
Bakkavor Group (BAKK) 118.20p 1.55%
Travis Perkins (TPK) 1,210.15p 1.48%
FTSE 250 - Fallers
Dunelm Group (DNLM) 754.26p -7.45%
Close Brothers Group (CBG) 1,245.00p -4.23%
Aston Martin Lagonda Global Holdings (AML) 422.20p -3.45%
Sirius Minerals (SXX) 3.58p -3.24%
AJ Bell (AJB) 352.00p -3.03%
Beazley (BEZ) 599.00p -2.76%
Renishaw (RSW) 3,438.00p -2.55%
Dechra Pharmaceuticals (DPH) 2,550.00p -2.52%
Oxford Instruments (OXIG) 1,186.00p -2.47%
Hochschild Mining (HOC) 178.60p -2.35%