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US GDP shock rattles markets - Market Analysis

With US GDP figures due for release and another day closer to the 2nd August deadline, the end of the week was likely to be dominated by news flow from the US. It didn’t disappoint.

Markets were hit in early trading as banking and commodity stocks led the FTSE lower in response to continued deadlock between The White House and Congress. European debt concerns were still evident, but somewhat overshadowed by the political inability to reach an agreement over raising the debt ceiling, which saw a further set back with an apparent rift developing in the Republican Party.

Adding to the woes, second quarter GDP results came in weaker than forecast, suggesting growth of 1.3% against a consensus forecast of 1.8%. Whilst much of the shortfall was attributed to a level of consumer spending not seen since the recession, more astonishing was the downward revision of the first quarter’s results which were corrected to a seasonally adjusted 0.4% from 1.9%. Such a drastic alteration compounds current issues as much of the debate, at least publically, is being fought over how the spending cuts and tax rises will influence the economy. The news heightens the stakes of the continued political impasse.

The FTSE staged a fight back late in the day, led by Vodafone which put on 4% following a long-awaited dividend payment from its part owned Verizon Wireless. The blue chip index ended the day at 5815, down 1.0%, with gold, silver and the Swiss franc once again enjoying inflows.

So as July comes to a close, the UK has about outperformed Europe, lower by 2% compared to DAX (-2.9%), CAC40 (-7.6%) and the Swiss exchange (6.5%).

This was posted in Bdaily's Members' News section by John Dance .