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London stocks remained slightly higher by midday on Wednesday as new data revealed that the UK economy continued to stagnate in July.
The FTSE 100 index was up by 0.1% at 8,213.59. Data from the Office for National Statistics showed that gross domestic product (GDP) grew by 0% in July, unchanged from June. Economists had anticipated a 0.2% increase.
In July, the services sector saw a marginal growth of 0.1%, recovering from a 0.1% decline in June. However, production output decreased by 0.8% following a 0.8% increase in June, and construction output fell by 0.4% after a 0.5% rise the previous month.
Liz McKeown, director of economic statistics at the ONS, commented, “The growth in services for July was primarily driven by gains in computer programming and health sectors, which rebounded from June’s strike actions. However, this was partially offset by declines in advertising, architecture, and engineering services.”
She added that manufacturing struggled overall, particularly in the automotive and machinery sectors, while construction also saw a downturn.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, noted that the stagnation in UK economic growth, following a weak June, is shifting expectations towards potential interest rate cuts. This has provided some support for UK stocks early in the session. She mentioned that while the services sector's growth helped mitigate declines in production and construction, the stagnant economic conditions will be closely watched by Bank of England policymakers. The prospect of two rate cuts in the coming months remains under consideration, though the likelihood of maintaining current rates is seen as above 75%.
In equity markets, Rightmove (LSE:RMV) saw an uptick after rejecting a takeover offer from Australian firm REA Group, describing the proposal as “wholly opportunistic” and undervaluing its future potential. REA had proposed 305p in cash and 0.0381 new REA shares per Rightmove share, valuing the offer at 698p—a 26% premium over the closing price before the offer was made public.
Trustpilot (LSE:TRST) experienced a boost as it reported first-half profits surpassing market expectations and announced a further share buyback.
WH Smith (LSE:SMWH) also saw gains after reaffirming its full-year outlook and unveiling a significant share buyback, following a strong fourth-quarter performance.
Conversely, Rentokil's (LSE:RTO) share price dropped after it downgraded its profit forecast for the year due to weaker-than-anticipated trading in North America during the summer.
Dunelm's (LSE:DNLM) shares fell despite reporting an increase in full-year profit and sales, citing a challenging consumer environment and uncertain timing for a market recovery.
