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(Alliance News) - Data showing UK economic growth nearly reached a standstill in July did little to prevent London's FTSE 100 ticking higher on Friday, with the prospect of improved US and China relations as well as Thursday's reassuring European Central Bank update lifting the mood after a challenging week.
The FTSE is still lower than it was at the end of last week, though Friday morning's gains were welcome respite after the index got close to falling below the 7,000 point mark on Thursday.
The FTSE 100 index was up 27.06 points, 0.4%, at 7,051.27 at midday. The mid-cap FTSE 250 index was up 50.05 points, 0.2%, at 23,849.99. The AIM All-Share index was up 2.61 points, 0.2%, at 1,298.46.
The Cboe UK 100 index was up 0.4% at 701.25. The Cboe 250 was up 0.2% at 21,624.78, and the Cboe Small Companies was up 0.3% at 15,473.15.
The pound was quoted at USD1.3867 midday Friday in London, up from USD1.3840 at the London equities close on Thursday.
"A big miss on UK GDP expectations didn't do any harm to the pound," AJ Bell analyst Russ Mould commented, noting the main UK indices also "shrugged off the news".
The UK faces a crippling cocktail of accelerating inflation and slower economic growth, analysts said on Friday, in the wake of concerning gross domestic product figures.
Labour shortages, driven by the "pingdemic", supply chain pressures and new virus cases almost brought GDP to a standstill in July, with figures from the Office of National Statistics showing a lowly 0.1% monthly climb, slowing from June's 1.0% hike. July's figure undershot expectations of 0.6% growth.
Although it was the sixth-successive month of economic growth, the pace has stalled considerably and UK GDP is still 2.1% below its pre-virus level.
"All this raises the unpalatable possibility that stagflation could take hold," the Hargreaves Lansdown analyst Susannah Streeter commented.
Stagflation is slowing economic growth coupled with accelerating inflation. As a result, eyes will be on next Wednesday's UK consumer price reading for August. According to FXStreet-cited consensus, an acceleration to a 2.3% yearly inflation rate is expected, from 2.0% in July.
New York futures were higher. The Dow Jones Industrial Average was called up 0.5%, while the S&P 500 and Nasdaq Composite were called 0.4% higher.
So far this week, however, the Dow has lost 1.4%, the S&P 500 is down 0.9% and the tech-heavy Nasdaq has shed 0.8%.
US President Joe Biden talked with his Chinese counterpart Xi Jinping for the first time in seven months Thursday, sparking hopes that relations between the world's largest economies will thaw.
During the call, Biden's message was that the US wants to ensure "the dynamic remains competitive and that we don't have any situation in the future where we veer into unintended conflict," a senior US administration official told reporters.
In Beijing, state broadcaster CCTV reported that the phone call was "candid, in-depth" and covered "extensive strategic communication and exchanges on China-US relations and issues of mutual concern," and that US policy on China has caused "serious difficulties."
Investors will hope that relations between the world's largest economies will be warmer, after market-spooking trade war talk and tariff threats were a common place during Donald Trump's US presidency.
"Helping to steady the ship was a conversation between US President Joe Biden and Chinese President Xi Jinping where they discussed the need to ensure competition doesn't veer into conflict. The fact the two parties are engaging is a positive and perhaps long overdue, given this was only Biden's second call with Xi since coming into power," AJ Bell's Mould added.
"Add in the fact that the European Central Bank didn't spook investors too much with its latest policy update – reassurance that it will only slowly withdraw stimulus measures – meant that markets are ending the week on a much brighter note."
In mainland Europe, the CAC 40 stock index in Paris and the DAX 30 in Frankfurt were both up 0.3%. The CAC has outperformed this week and is on track for a 0.2% weekly rise, though the DAX is 0.7% lower than it was at the end of last week.
Luxury goods firm LVMH Moet Hennessey Louis Vuitton rose 1.9% in Paris, after HSBC lifted the stock to Buy. London-listed peer Burberry, also helped by its exposure to China, rose 1.7% in a positive read-across.
Conversely, Frankfurt-listed Fresenius Medical Care fell 4.2% after JPMorgan cut the kidney dialysis services provider to Underweight from Neutral. In addition, Barclays downgraded it to Equal-Weight from Overweight.
Back in London, the mining sector was having a strong session, with BHP up 0.9%, Rio Tinto rising 1.3% and Anglo American up 1.4%. The trio are still on track for a weekly loss, however.
On AIM, SigmaRoc rose 2.4% as the quarried materials group announced it has entered into a deal with Marshalls to develop ultra-low carbon technology within the concrete building materials sector. FTSE 250 listed Marshalls was trading 0.1% lower.
"The aim of this collaboration is to share learnings in the application of current technologies while working together to develop new low carbon methods of production," SigmaRoc said.
Marshalls, which manufactures natural stone and concrete hard landscaping products, will get low-carbon alternative to its product range as part of the deal.
The euro rose to USD1.1832 on Friday afternoon, from USD1.1815 at the European equities close on Thursday. Against the yen, the dollar was trading at JPY109.95, up from JPY109.78.
Brent oil was quoted at USD72.66 a barrel midday Friday in London, down from USD72.91 late Thursday. Gold was quoted at USD1,794.14 an ounce, up from USD1,791.00.
Still to come on Friday are US producer price figures at 1330 BST.
"US producer prices are predicted to power upward yet again. This could set off warning bells ahead of next week's US consumer price index," BDSwiss analyst Marshall Gittler commented.
Gittler noted that while the relationship between producer price and consumer price inflation is not always as simple as a hot PPI leading to an accelerated CPI, a sizeable reading on Friday could spook markets.
"In any case, the market is likely to look aghast at higher prices and think it means earlier tapering, which could be positive for USD," Gittler added.
By Eric Cunha; ericcunha@alliancenews.com
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