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U.K. stocks were the worst performing of the major stock markets in Europe on Friday, after data showed an unexpectedly strong finish to the second quarter.
The FTSE 100
UK:UKX
fell by more than 1% midday, as the Office for National Statistics reported that GDP grew by 0.5% in June, sending GDP up by 0.2% on a quarterly basis for the second quarter. Economists had anticipated zero growth during the second quarter.
The yield on the 2-year gilt
BX:TMBMKGB-02Y
rose by 8 basis points to 4.96%. The GDP data raise the possibility that the Bank of England will go back to 50 basis point hikes after opting for a quarter-point increase in August. The pound
GBPUSD,
added 0.5% to $1.2737.
“Well, there are more data to digest, such as next week’s CPI and jobs reports. Anything that is above expected, particularly on earnings, will put pressure on Governor Bailey et al again. But, based solely on the June and Q2 economic performance, do not rule out the Bank yet,” said Jennifer Lee, senior economist at BMO Capital Markets.
Sandra Horsfield, an economist at Investec Securities, did note several one-off factors. June had an extra working day after King Charles III’s coronation in May, and usually warm weather helped hospitality, tourism and construction in June, which won’t be repeated in July because of wet weather.
However, she also said car manufacturing and sales picked up, helped by improving supply chains.
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