London midday: Stocks stay down as sterling drops on weak UK GDP
London stocks were still a little weaker by midday on Friday, with the pound under pressure as it emerged that the UK economy contracted in the second quarter for the first time since 2012.
The FTSE 100 was down 0.3% at 7,265.76, while sterling was off 0.3% against the dollar at 1.2093 and 0.6% weaker versus the euro at 1.0793 as the latest set of growth figures from the Office for National Statistics sparked fears of a recession.
A weaker pound meant the FTSE was able to outperform its European counterparts, with Italy's FTSE MIB down 2.4% and the benchmark Stoxx 600 index 0.7% lower amid political turmoil in Italy, where deputy Prime Minister Matteo Salvini called for a snap election.
Gross domestic product contracted 0.2% quarter-on-quarter in Q2 compared to 0.5% growth in the first quarter, which was boosted by Brexit stockpiling. Analysts had been expecting no growth.
On the year, meanwhile, GDP grew 1.2% in the second quarter, down from 1.8% growth and missing expectations of a 1.4% increase.
Rob Kent Smith, head of GDP at the ONS, said: "GDP contracted in the second quarter for the first time since 2012 after robust growth in the first quarter. Manufacturing output fell back after a strong start to the year, with production brought forward ahead of the UK’s original departure date from the EU.
"The construction sector also weakened after a buoyant beginning to the year, while the often-dominant service sector delivered virtually no growth at all.
"The trade deficit narrowed markedly, as imports fell following a sharp rise in the first quarter ahead of the UK’s original departure date from the EU."
Oanda analyst Craig Erlam said: "Heading into a no-deal Brexit in recession would be a nightmare scenario for Boris Johnson's team and could further drag on the pound at a time when it is already in free-fall.
"The reaction to the data wasn't particularly positive either, with the pound now testing its recent lows and eyeing 1.20 against the dollar. Brexiteers may struggle to blame project fear as the PR battle with the People's Vote campaign heats up so we can probably expect plenty of finger-pointing at how badly Europe is performing and how the global slowdown is to blame."
More broadly, trade tensions were in focus again following a Bloomberg report that the US is planning to delay a decision on granting licenses that would allow US companies to sell to Chinese tech company Huawei.
In equity markets, advertising giant WPP was sitting pretty at the top of the FTSE 100 as its first-half revenue rose 1.6% to £7.6bn, beating expectations of £7.5bn. The company backed its full-year guidance even as pre-tax profit fell 44% to £478m.
Hikma Pharmaceuticals was the standout gainer on the 250, meanwhile, as it lifted the full-year sales outlook for its generic drug business and reported a 7% jump in first-half group revenue.
Security services firm G4S pushed higher as it announced plans to separate its cash solutions business and said first-half underlying pre-tax profit increased 7.4% to £175m on revenue of £3.7bn, up 4.7% on the year.
William Hill was in the green as its interim results were a slight beat versus expectations. The gambling group's adjusted first-half operating profit fell 33% to £76.2m as it took a hit from the government's regulatory cap on fixed odds betting terminals and US expansion costs.
Market Movers
FTSE 100 (UKX) 7,270.23 -0.22%
FTSE 250 (MCX) 19,135.53 -0.01%
techMARK (TASX) 3,845.08 -0.18%
FTSE 100 - Risers
WPP (WPP) 983.80p 7.52%
JD Sports Fashion (JD.) 619.61p 2.04%
AstraZeneca (AZN) 7,367.00p 1.94%
Next (NXT) 5,956.00p 1.67%
Ocado Group (OCDO) 1,227.50p 1.61%
Intertek Group (ITRK) 5,732.00p 1.34%
Hargreaves Lansdown (HL.) 2,076.00p 1.27%
Fresnillo (FRES) 693.60p 1.20%
Experian (EXPN) 2,585.00p 1.06%
SEGRO (SGRO) 757.60p 1.04%
FTSE 100 - Fallers
Evraz (EVR) 582.00p -5.76%
ITV (ITV) 107.55p -2.71%
Antofagasta (ANTO) 847.80p -2.51%
International Consolidated Airlines Group SA (CDI) (IAG) 453.70p -2.24%
BAE Systems (BA.) 558.00p -1.93%
Standard Life Aberdeen (SLA) 251.10p -1.91%
Prudential (PRU) 1,504.25p -1.75%
Micro Focus International (MCRO) 1,670.80p -1.72%
Smurfit Kappa Group (SKG) 2,426.00p -1.70%
Anglo American (AAL) 1,834.20p -1.62%
FTSE 250 - Risers
Hikma Pharmaceuticals (HIK) 1,963.50p 6.65%
William Hill (WMH) 154.65p 5.38%
G4S (GFS) 192.35p 4.71%
IWG (IWG) 422.40p 2.77%
Woodford Patient Capital Trust (WPCT) 42.00p 2.69%
Hastings Group Holdings (HSTG) 190.00p 2.54%
Centamin (DI) (CEY) 140.90p 2.51%
Vivo Energy (VVO) 119.80p 2.39%
Sanne Group (SNN) 548.00p 2.24%
Syncona Limited NPV (SYNC) 241.19p 2.20%
FTSE 250 - Fallers
Sirius Minerals (SXX) 9.12p -4.45%
Metro Bank (MTRO) 300.60p -3.90%
Wood Group (John) (WG.) 458.70p -3.51%
Hill & Smith Holdings (HILS) 1,134.00p -3.08%
Playtech (PTEC) 400.80p -2.58%
Intu Properties (INTU) 37.82p -2.47%
Hunting (HTG) 429.40p -2.23%
Plus500 Ltd (DI) (PLUS) 580.60p -2.09%
Ferrexpo (FXPO) 224.37p -2.02%
Sophos Group (SOPH) 399.30p -1.99%