Bounce back as US growth hits 1.6%
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.