British GDP meets expectations with 0.3% rise in second quarter
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U.K. stocks moved higher Wednesday, buoyed by a rise for broadcaster ITV PLC after its financial update, while expectations for modest growth in the British economy were met.
The FTSE 100 index picked up 0.6% to 7,479.27, with all but the tech sector gaining ground. The index on Tuesday advanced 0.8% (http://www.marketwatch.com/story/ftse-100-advances-with-oil-stocks-up-jimmy-choo-rallies-2017-07-25), helped by advances for energy and mining stocks.
ITV (ITV.LN) topped the London benchmark early Wednesday, as its stock notched a 3% rise. The home of "Downton Abbey" backed its 2017 guidance and raised its dividend (http://www.marketwatch.com/story/itv-profit-falls-16-but-dividend-is-raised-2017-07-26), saying its 16% fall in first-half pretax profit was in line with its expectations.
Stock movers: Compass Group PLC shares (CPG.LN) climbed 2.4% after the catering services company said reported a rise in third-quarter revenue and backed its full-year expectations.
Also higher, Fresnillo PLC (FRES.LN) was up 0.8%. The miner reaffirmed its 2017 production guidance (http://www.marketwatch.com/story/fresnillo-gold-silver-production-rises-2017-07-26) as it reported higher silver and gold output for the second quarter.
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But Sage Group PLC (SGE.LN) shares lost 3.5% after the company said organic software and software related services revenue dropped by 5.9% for the first nine months of the fiscal year. The financial software maker also said it's buying Intacct Corp., a cloud-based financial management software maker based in San Jose, Calif., for GBP654 million ($850 million).
Shares of engineering group GKN PLC (GKN.LN) fell 0.2%, paring losses, after the company said first-half pretax profit more than tripled to 559 million pounds (http://www.marketwatch.com/story/gkn-earnings-rise-offers-upbeat-2017-outlook-2017-07-26)($719.9 million). The aerospace and automotive parts supplier said it has closed its defined-benefit pension scheme.
Economic data: A first reading of U.K. gross domestic product in the second quarter was released by the Office for National Statistics. The British economy grew by 0.3% in the second quarter over the previous quarter and was up 1.7% year-over-year, meeting expectations from a FactSet survey of economists. In the first quarter, GDP expanded by a modest 0.2%.
British economic growth in the second quarter was driven by the services sector, while production and construction acted as a drag, the ONS said in its statement (https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/articles/monthlyeconomiccommentary/july2017).
"The economy has experienced a notable slowdown in the first half of this year," ONS Head of National Accounts Darren Morgan said.
The pound fell to an intraday low of $1.3000 before rising to $1.3023, not far off from late Tuesday's settlement of $1.3026 in New York.
While growth remains largely anemic, tentative signs pointing to improvement in the second half of the year include better-than-expected retail sales in June, said Ben Brettell, senior economist at Hargreaves Lansdown, in a note.
"Yesterday, a CBI survey showed U.K. factories increasing output at the fastest rate since the mid-1990s, suggesting manufacturing -- which makes up around ten percent of the economy -- might make a meaningful contribution to overall economic growth in the third and fourth quarters," he said.
"As ever it's worth noting that initial GDP estimates can usually be taken with a pinch of salt, as they are based on less than half of the data which will ultimately be available, and are therefore subject to revision in the coming months," he said.
After trading closes in London, the U.S. Federal Reserve will announce its latest monetary policy decision. U.K. investors closely watch U.S. central bank moves, as they can drive price changes in the pound and in government bonds, as well as shift sentiment.
See:Fed to stick to plans for rate hike, balance-sheet selloff this year (http://www.marketwatch.com/story/no-retreat-fed-to-stick-to-plans-for-rate-hike-balance-sheet-selloff-this-year-2017-07-24)
The Federal Open Market Committee decision is due at 7 p.m. London time, or 2 p.m. Eastern.
(END) Dow Jones Newswires
July 26, 2017 05:59 ET (09:59 GMT)