Bounce back as US growth hits 1.6%

The Scotsman - - Comment -

THIN sum­mer vol­umes led to volatile trad­ing in London yes­ter­day with the FTSE 100 over­com­ing early losses to close in the black af­ter bet­ter-thanex­pected eco­nomic news on both sides of the At­lantic.

A pos­i­tive re­vi­sion to the UK’s gross do­mes­tic prod­uct (GDP) fig­ure for the sec­ond quar­ter – dur­ing which the econ­omy grew by 1.2 per cent in­stead of the 1.1 per cent orig­i­nally es­ti­mated last month – gave traders a small boost.

But all eyes were on the United States, where data showed GDP grew by an an­nu­alised 1.6 per cent in the sec­ond quar­ter, bet­ter than the 1.4 per cent pre­dicted but still be­hind the ini­tial es­ti­mate of 2.4 per cent.

The US Fed­eral Re­serve chair- man, Ben Ber­nanke, warned that Amer­ica’s re­cov­ery has weak­ened more than ex­pected and the cen­tral bank is ready to take fur­ther steps if needed.

The Foot­sie closed at 5,201.56, up 45.72 points on the day and 0.1 per cent higher for the week, end­ing a two-week los­ing streak. The in­dex traded as low as 5,121 soon af­ter Ber­nanke’s re­marks. Trad­ing vol­umes were low at only 69 per cent of their 90-day daily av­er­age.

Econ­o­mists warned the UK’s GDP im­prove­ment was un­likely to be re­peated in the cur­rent quar­ter and said the UK govern­ment’s spend­ing squeeze and VAT hike to 20 per cent would have a ma­jor im­pact on growth.

The progress will also de­pend on the US, where fears have risen in re­cent weeks that the world’s biggest econ­omy could be fac­ing a dou­ble-dip re­ces­sion.

Stronger UK fig­ures saw the pound up against the dol­lar, at $1.55, but it was down against the euro at 1.21.

The flight from riskier as­sets ear­lier in the London ses­sion hit com­mod­ity stocks, with losses for a num­ber of ma­jor min­ing stocks, in­clud­ing BHP Bil­li­ton af­ter a drop of 4.5p to 1,798p.

Tul­low Oil fell 48p to 1,211p – mak­ing it the biggest faller in the FTSE 100 In­dex – af­ter the govern­ment in Uganda re­pos­sessed the joint ven­ture King­fisher field in a move seen as a fur­ther set­back to the coun­try’s oil in­dus­try.

BP shares re­mained un­der pres­sure with a drop of 5.9p to 379.7p, while, in the bank­ing sec­tor, Royal Bank of Scot­land fell 0.4p to 43.5p and Lloyds Bank­ing Group dropped 0.8p to 68.6p.

In cor­po­rate re­sults, prop­erty web­site Right­move re­ported a 39 per cent rise in half-year prof­its and raised its div­i­dend, but shares lost ground amid the mar­ket un­cer­tainty.

An­a­lysts de­scribed the fig­ures as strong and said there was some en­cour­age­ment from up­beat com­ments by Right­move’s man­age­ment, but this failed to stop shares fall­ing 4.7p to 617.2p.

Aga Range­mas­ter shares were 6.5p higher at 92p af­ter the cooker firm re­turned to profit at the half-year stage and re­stored its div­i­dend, al­though an­a­lysts warned the com­pany’s pen­sion deficit rep­re­sented a chal­lenge.

Dundee-based med­i­cal test­ing kit maker Axis-Shield closed up 4.5p at 278p af­ter fi­nance di­rec­tor Ronny Her­mansen bought 11,000 shares at 276.5p each, tak­ing his to­tal stake from 50,375 shares to 61,375.

Ag­greko, the Glas­gow-based tem­po­rary power sup­plier, was up 42p or 3 per cent at 1,437p af­ter it re­vealed its in­terim re­sults on Wed­nes­day.

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