This morning saw the release of data which shows that the UK economy grew faster than expected in the final quarter of 2016. The pound is higher on the day but has seen some weakness since the release, perhaps due to some traders seeing this as a good opportunity to book some profits after a strong run higher in the past couple of weeks. Whilst the FTSE 100 is higher on the day by around 15 points, the index is lagging behind its counterparts around the globe with benchmarks in New York, Tokyo and Frankfurt all surging higher in the past 24 hours.
UK economy remains vulnerable despite good data
The preliminary reading of UK GDP for the final 3 months of 2016 has shown a larger than expected rise. An increase of 0.6% Q/Q is marginally higher than consensus forecasts and the prior reading was also revised upwards by 10 basis points. The release provides yet more evidence that the UK economy is running along nicely and barring a blip following the EU referendum, there is little to suggest any weakness. However the dark cloud of uncertainty that was created last June continues to hover threateningly overhead and despite the Supreme Court’s ruling that parliamentary approval is required for triggering Article 50, the process of beginning formal discussions on the terms of life outside the EU is seemingly drawing closer and this poses a major threat to the UK economy in the coming years.
Diageo cheers latest results
Despite the broader index only rising marginally higher, there are several large moves under the surface with some pretty major moves in individual stocks. The biggest gainer on the FTSE 100 this morning is Diageo (LON:DGE), with the stock rising by more than 4% after the beverages company reported strong rises in both net sales and operating profit. Banking shares are also enjoying a move into positive territory with RBS (LON:RBS), Lloyds (LON:LLOY) and Barclays (LON:BARC) all rallying following news that RBS has confirmed it has set aside a further £3.1bn to pay fines relating to residential mortgage-backed securities (RMBS). Whilst the news itself isn’t particularly positive investors have reacted well, possibly in the hope that this will draw a line under the ongoing saga. At the other end of the index is Whitbread (LON:WTB), with the group that includes the Costa Coffee and Premier Inn brands off by more than 4% after announcing disappointing performance in its restaurant business.