FT.COM

London shares weaker ahead of GDP data

By Michael Hunter

Published: January 26 2010 08:59 | Last updated: January 26 2010 08:59

London equities continued to fall on Tuesday as traders awaited data that are expected to show a return to growth in the UK economy.

The first reading for fourth-quarter gross domestic product, due out at 9.30am, looked set to confirm an end to the recession after six successive quarters of decline.

“I would be astounded if the UK did not grow in the fourth quarter of 2009,” said Howard Archer, chief UK and European economist at IHS Global Insight. However, he cautioned: “Serious doubts remain about the strength and sustainability of the UK’s economic recovery, given the still very challenging economic and financial environment it faces. Indeed, for many people, it may not even feel like recovery for some time to come.”

As traders waited for the numbers, London-listed resource stocks were once more taking the biggest toll on the market, tracking weaker base metals prices on worries about the impact on demand of tighter monetary policy in China. Anglo-Swiss miner Xstrata was the biggest single casualty on the FTSE 100, down 3.1 per cent at £10.68.

Overall, London’s benchmark index fell 33 points to 5,227.70, putting it on course for a fifth consecutive session of losses. All but one of the 10 biggest fallers came from the mining sector.

The selling was broad-based, with only a handful of stocks – mainly defensives – registering small gains. A rise of just 0.5 per cent to 640.7p was enough to make electricity and gas distributor National Grid the best performing stock on the FTSE 100.

An upbeat note on European airlines from Morgan Stanley helped British Airways buck the wider downwards trend to rise 0.4 per cent to 208.3p. Although the broker did not issue specific comment on the UK flag carrier, it said conditions faced by the wider sector were looking brighter.

“We are more comfortable that passenger, cargo and capacity trends will be favourable in 2010,” it concluded in a note to clients. “We expect passenger volumes to rebound by 3 to 4 per cent for major carriers and 10 per cent for low-cost carriers, and cargo tonnes to grow by 10 per cent.”

The FTSE 250, seen as more representative of the domestic UK economy, fell 27 points to 9,265.90.

PartyGaming was the biggest faller among mid-caps after co-founder Anurag Dikshit announced he was selling his remaining 10 per cent stake in the online gaming group. The shares fell 5.8 per cent to 276.4p.