US GDP Surprise Forces Weak End to Lacklustre Week
The UK market and other European indices ended the week in the red as weaker-than-forecast US GDP growth dampened sentiment
The FTSE 100 index closed 56 points weaker at 5,258—a drop of 1.1%, while the FTSE 250 index shed 125 points or 1.3% to settle at 9,949.
The Bureau of Economic Analysis, in its advance estimates, said the US economy grew 2.4% in the second quarter, marginally lower than the street's expectation and a marked deceleration from the first quarter’s 3.7% expansion. Higher imports and a deceleration in private inventory investment were partly offset by an upturn in residential fixed investment in the second quarter.
Other macro-economic data released today in the US--the Reuters/University of Michigan consumer sentiment index and the Institute for Supply Management in Chicago--topped market consensus but it was the GDP data that took precedence in investors' minds. Commodities had a rough day, with crude oil and most base metals declining, while the perceived safe haven, gold, rose as investors shied away from risk assets.
In London, United Utilites was a rare riser, up 4.4% by close of play after announcing it has agreed to sell its 50% stake in Meter Fit, its non-regulated gas and electricity meter ownership business, to existing joint venture partner Marlin Acquisitions. The price agreed is £119 million and United expects the deal to close in the second half of the year. (Read Morningstar’s full analysis of United Utilities here.)
Fellow utility play Severn Trent took second place on the FTSE 100 leaderboard, up 2.3%, and a handful of defensives also managed to buck the broader negative trend: Smith & Nephew added 0.6%, SABMiller took on 0.4% and Diageo ticked up 0.3%. Also featuring on the upside was Rangold Resources, which benefitted from investors’ rush for gold following the US GDP data. Randgold shares closed 1.2% higher.
Elsewhere, the FTSE 100 constituents traded largely in the red, led by oil & gas plays such as Essar Energy, down 3.5%, Royal Dutch Shell, 2.0% behind, and BP, off 1.8%. With the exception of the gold plays, miners followed suit so that Xstrata, Vedanta Resources and Rio Tinto lost around 1.5% each. And financials also felt the heat, with Legal & General, Man Group and Aviva each shedding between 2.3% and 2.8%.
