FTSE close: GDP shock puts shares in reverse

By Ed Monk for Thisismoney.co.uk
Updated:

 

17.15 (close)

Dealers monitor their screens on the trading floor of IG Index in London

Market watcher: GDP data will set the agenda today.

The FTSE 100 Index closed lower today after official figures revealed the UK economy shrank in the fourth quarter and delivered a blow to recovery hopes.

The Footsie closed 26.1 points lower at 5917.7 after the Office for National Statistics (ONS) said gross domestic product declined by 0.5% between October and December.

While the drop was blamed on weather factors, economists said the report heightened fears over the ability of the UK to withstand austerity measures.

Sterling was down more than 1.5% against the US dollar at 1.58 and dropped 1.2% to 1.15 euros as traders bet the GDP news would put back the timing of any rise in interest rates.

Unsurprisingly, consumer-facing stocks were among those unnerved by the weaker growth prospects as Next dropped 67p to 2075p, Marks & Spencer fell 8p to 361.4p and Tesco declined 6.5p to 399p.

In the banking sector, Lloyds Banking Group eased 1.9p to 63.2p, Royal Bank of Scotland dropped 0.8p to 43.3p and Barclays weakened 2.1p to 298.5p.

The market was also hampered by weaker commodity stocks as investors continued to worry about possible moves by China to curb soaring economic growth. Randgold Resources was among the fallers, dropping 180p to 4855p, while Kazakhmys fell 58p to 1500p.

One of the most significant moves in the top flight came from BSkyB after the Culture Secretary kept the door ajar for News Corporation's planned takeover of the broadcasting giant.

Jeremy Hunt said he was minded to recommend a full investigation by the Competition Commission, but before doing so will consider undertakings made by NewsCorp in order to address media plurality concerns.

With the company also due to post strong half-year results on Thursday, BSkyB shares lifted 2p to 752p.

Fashion house Burberry topped the risers' board, after peer Luxottica, which manufactures sunglasses for luxury brands such as Armani and Ray-Ban, posted a bullish trading update. Burberry jumped more than 3% or 33p to 1063p.

Guinness and Smirnoff vodka maker Diageo saw shares climb 20p to 1241p after a report revealed the US spirits market had seen signs of recovery in 2010, with sales up 2%.

In the FTSE 250 Index, shares in Imperial Leather soap maker PZ Cussons fell 7% after it reported largely flat half-year profits and said it was cautious about prospects for the full year due to discounting by UK retailers and price hikes.

The company, which dropped 26.6p to 352.6p, is battling against soaring input costs such as palm oil, a key ingredient in many of its products. The biggest Footsie risers were Burberry up 33p at 1063p, Resolution ahead 7.7p at 253p, Inmarsat up 5p at 636p and Prudential ahead 13.5p at 668p.

The biggest Footsie fallers were Kazakhmys down 58p at 1500p, Randgold Resources off 180p at 4855p, International Consolidated Airlines down 10p at 275p and Fresnillo off 43p at 1312p.

15.30: With the close in sight, the FTSE 100 is recovering lost ground and is now 11.49 points lower at 5932.36.

On Wall Street, the Dow Jones has headed lower on opening - it sits 35.95 points down at 11,947.52 after an hour of trading.

13.30:

The FTSE 100 is still lower, 27.46 points off at 5916.39.

On Wall Street later, the futures markets expect the Dow Jones to open 36 points lower at 11,894.

12.15:

Unsurprisingly, consumer-facing stocks are among those unnerved by the weaker growth prospects.

Next dropped 59p to 2083p, Marks & Spencer fell 6p to 363.4p and Tesco declined 5.45p to 400.05p.

In the banking sector, Lloyds Banking Group eased 1.7p to 63.4p, Royal Bank of Scotland dropped 0.7p to 1886p and Barclays weakened 3.7p to 296.8p.

It has left the FTSE 100 17.7 points lower at 5926.09.

In the FTSE 250 Index, shares in Imperial Leather soap maker PZ Cussons fell 8% after it reported flat half-year profits and said it was cautious about prospects for the full year due to discounting by UK retailers.

The company, which dropped 30.8p to 348.4p, is also battling soaring input costs such as palm oil, a key ingredient in many of its products.

10.50:

The fall in UK GDP has hurt the pound.

Sterling fell by more than a cent versus the dollar to a session low of $1.5770, down around 1.4% on the day. Against the euro, the pound fell to trade at €1.1606.

The FTSE 100 has halted the drastic fall that came after the GDP data was published, but it is still 32.46 points lower at 5911.39.

10.15:

The FTSE 100 fell today after dismal news on UK GDP, with miners falling on dampened activity in China, while BSkyB gained on hopes its takeover by News Corp would go ahead.

Shares had been drifting before news came through of a shock 0.5% contraction in UK GDP in the final quarter of 2010. From a 20 point gain before the announcement, the Footsie slammed into reverse, dropping around sixty points.

Over the session as a whole, the FTSE 100 is 27.9 points lower at 5915.99.

Continued fears over possible new measures by China to cool economic growth impacted on parts of the resources sector as Antofagasta declined 10p to 1398p and Kazakhmys lost 1% or 17p to 1541p.

One of the most significant moves in the top flight came from BSkyB after the Culture Secretary kept the door ajar for News Corporation's planned takeover of the broadcasting giant.

Jeremy Hunt said he was minded to recommend a full investigation by the Competition Commission but before doing so will consider undertakings made by NewsCorp in order to address media plurality concerns.

With the company also due to post strong half-year results on Thursday, BSkyB shares lifted 6p to 756p.

In the FTSE 250 Index, shares in Imperial Leather soap maker PZ Cussons fell 7% after it reported flat half-year profits and said it was cautious about prospects for the full year due to discounting by UK retailers.

Shares were 26.1p lower at 353.1p.

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