Return to growth fails to lift FTSE 100 as investors brace for BoE rate hike

A return to economic growth in the UK was not enough to lift the FTSE 100 this morning as investors mulled whether the upbeat data would push the Bank of England to hike rates this year.

The capital’s premier index dipped 0.45 per cent to 7,098.19 points.

The UK economy grew 0.4 per cent in August, a lick lower than analysts’ expectations, a return to expansion after the Office for National Statistics revised down the July rate to minus 0.1 per cent.

Expansion was generated by a rebound in the UK’s services industry, which represents around 80 per cent of the country’s economy, driven by a near 50 per cent uplift in travel agent output as Brits chose to staycation amid travel restrictions.

Despite the upbeat data, investors were taking a cautious approach, noted Russ Mould, investment director at AJ Bell.

“The FTSE 100’s biggest fallers in index point terms were a mixture of defensive and cyclical stocks, so investors are clearly not falling on one side of the fence.”

Industrials weighed the premier index down, with the likes of Rio Tinto, BHP and Royal Dutch Shell falling more than 1.10 per cent, partly triggered by concerns over possible demand destructions due to commodity prices being too high.

Housebuilders were the shining light in London this morning after Barratt posted a positive trading update. Along with rivals Taylor Whimpey and Persimmon, the trio lined the top risers column.

The pound, which hits exporting stocks, a large proportion of which makes up the FTSE 100, strengthened sharply against the greenback, up 0.29 per cent to buy $1.3627.

European shares fared better – Germany’s Dax 30 was up 0.64 per cent and the pan-European Stoxx 600 rose 0.34 per cent.

More to follow.