News Column

MARKET COMMENT: UK GDP Estimates Causes Pound To Jump

August 15, 2014

LONDON (Alliance News) - UK stocks jumped further slightly following a positive second estimate of second quarter UK GDP however, it was the pound that was most affected as it gained some of the ground it lost amid the Bank of England inflation report.

The FTSE 100 is up 0.6% at 6,725.33, while the FTSE 250 is up 0.5% to 15,759.02 and the AIM All-Share up 0.2% at 755.96.

The Office of National Statistics revised its year-on-year GDP estimates to 3.2% from 3.1% while keeping the quarter-on-quarter estimate the same at 0.8% growth. In addition, the second quarter, services output climbed 1% from the prior quarter, unchanged from the previous estimate published on July 25.

The pound had a positive reaction to the news as it jumped to a high of USD1.6710 before falling to USD1.6689 as markets adjusted.

However, Rob Wood, chief economist at Berenberg warns that the expansion in manufacturing could be exposed to geopolitical tensions; "widely spread expansion will get more lopsided over the next couple of quarters as events in Ukraine are weighing on the internationally exposed manufacturing sector, while UK domestic demand continues to expand rapidly."

In corporate news the FTSE 350 is led by the mining sector, with BHP Billiton sitting atop the FTSE 100 gainers. Following and internal review of structural alternatives, the company said that its preferred option for simplifying its portfolio is a demerger of a selection of its assets. The company has been working to simplify its portfolio for more than a decade as it looks at options to make the company simpler and more productive. The company's shares are up 2.8%.

Also up is platinum firm Johnson Matthey was raised straight to Conviction Buy from Neutral by Goldman Sachs. The company's shares are up 1.0%.

Meanwhile the news ofBalfour Beatty's rejection of Carillion's takeover bid has hit Carillion's share price, down 2.3%. The company is in the top five fallers in the mid-cap index. Balfour Beatty trades 0.7% higher.

By Neil Thakrar;

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Source: Alliance News

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