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FTSE 100: 6598.18 +21.44 (0.33%)

Osborne alarm over growth while US soars

Stock MarketTue (close): Chancellor George Osborne’s plans were thrown into doubt today after official figures showed the economy growing at a slower pace than first thought.

The Office for National Statistics (ONS) surprisingly revised down its UK gross domestic product (GDP) growth estimates for the last five quarters.

While  growth of 0.7% in the third quarter (Q3) was confirmed and unrevised from the initial estimate published last month, ONS said GDP in volume terms between Q3 2013 and Q3 2014 increased by 2.6%, compared with the initial estimate of 3%.

The lower rate of growth is likely to prompt a round of other revisions by forecasters.

Uncertainty over the direction of oil prices and demand in emerging markets will also need to be built into next year’s figures. However, faster than expected US growth may help make up for a shortfall elsewhere.

Investors were boosted by better than expected figures from the US. Growth figures were the best for a decade as shoppers poured into the shopping malls.

Gross domestic product for the third-quarter leapt a better-than-expected 5% against a forecast 4.3%. It was the best performance the nation has recorded in more than 10 years. Consumers continue to spend more as they feel emboldened by a stronger job market, a stronger housing market and rising stocks.

The dollar was boosted by the figures and U.S. stocks rose, with the Dow closing above 18,000 for the first time ever and the S&P 500 also ending at a record. The Dow rose as high as 18,069.22 and is up about 175% from a 12-year closing low hit on 9 March 2009. The S&P’s record close was its 51st such record this year.

The pre-Christmas rally continued in London with a sixth straight gain for equities which rose to a two-week high.

On a thin day for corporate news, confectioner Thorntons was the stand-out corporate announcement. Shares fell sharply after it warned of a “significant reduction” in orders from major supermarkets and a problem with its warehouse distribution. The stock dropped by over a fifth after the retailer said earnings for the full year were to be “below those achieved for the last financial year”. They closed down 26.25p (22.2%) at 92p.

Cameroon-focused oil explorer Bowleven, based in Edinburgh, jumped after being allowed extra time for the completion of the farm-out agreement over its Etinde project as it continued to sweat over presidential approval. Shares closed up 1p (4.76%) at 27.5p.

Other oil and gas-related stocks were largely higher after Brent crude rose slightly.  Weir Group, Tullow, Premier Oil and Petrofac made decent gains.

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