FTSE-100 shares jump as recession data beats City forecasts

Shares on the FTSE-100 Index jumped today as the much-anticipated data on Britain's Covid recession came in less gloomily than expected.

Despite a late sell-off in US shares last night, the FTSE-100 rose 46.77 points to 6201.11 by lunchtime. It had been expected to open lower but, while the quarterly GDP number came in at a shockingly low 20.4%, data for June came in with growth of 8.7%. Traders viewed that as positive for the pattern of the economy ahead.

The global mood, which had seen decent gains so far this week in Europe, had been dimmed by a sudden reversal of US markets shortly before the close last night as Republican Senate leader Mitch McConnell poured cold water on the prospect of a deal on the keenly awaited Covid stimulus deal, seen as a key to the US economy's fightback.

CMC's Michael Hewson said the long-running row between parties over the package had lost a sense of urgency because markets have risen to near record highs and that last night's sell-off could actually help get a deal over the line. "A market puke might actually concentrate minds and focus attention on the job in hand," he said.

Gold and silver both fell during the sell-off, which Hewson put down to a rise in yields on US Treasury bonds, possibly caused by a strong rise in US factory gate prices for July, suggesting improving demand, as well as rising inflation to come.

However, this morning was all about UK GDP figures, which showed the economy plunging into recession and compared with minus-2.2% in the first quarter. Economists in the City banks were expecting falls of anywhere between 15% contraction for the second quarter of the year to minus-25% but the consensus was for 20.5% contraction, so the figure was broadly in line with expectations, probably having little impact on share prices.

Services fell 19.9% in the quarter and manufacturing 20.2%. Construction was down 35%. Each was a record fall.

As with so much official economic data, the trouble for those trying to invest in the markets is that they are always looking far in the rearview mirror. Share prices are a reflection of what the future will bring, so traders will be looking for any signs of how the recovery from the dismal second quarter is faring. Yesterday's figures showing massive increases in those out of work are hardly food for optimism, but there are undoubtedly signs of a return to more healthy conditions in some sectors such as retail.

As Hewson says: "However bad this morning's numbers are, from an output point of view the low point is, in all probability, behind us."

Much of the improvement depends on the prospects for a Covid vaccine that could get life back to some semblence of normality.

There may be some good news at last on industrial relations at British Airways, owned by IAG. The Times today reports that chief executive Alex Cruz has setn a letter to staff talking of how the airline has signed an agreement in principle with the GMB and Unite unions. The airline is fighting to redesign its entire payroll structure to get rid of the older, more lucrative contracts. IAG shares fell 2% today.

Market M&A and fundraising activity shows little sign of dimming globally, with expectations rising today that Airbnb is set to file for a Wall Street flotation despite the collapse in travel markets. Morgan Stanley and Goldman Sachs are set to work on the offering which could value the group at $18 million or more.

Hugely popular stock, Tesla, cheered its army of global retail investors with news of a five-way split in the shares, making them individually more affordable to trade for small shareholders. The stock rose last night on the news, making they will still be worth more than $300 apiece.

HSBC pushed 3% higher, dragging the FTSE-100 up nine points, with other big index movers being AstraZeneca and GSK, which both gained 1%.

Admiral, the insurance group, jumped 5% after paying out a bumper dividend, citing reduced levels of uncertainty.

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