By Barbara Kollmeyer, MarketWatch
Stocks fell in London on Wednesday, with sentiment dogged by weak growth data and losses for heavily weighted oil shares.
The FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX -0.31% dropped 0.8% to 5,947.21, not helped by a 0.5% gain for the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.0982% /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.0982% /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.0982% /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.0982% , which was last sitting at $1.2323. The pound initially fell, then steadily climbed after data showed the U.K. economy contracted 2% in the first quarter.
That was the biggest contraction since the global financial crisis, though it still came in better than expectations by the Bank of England for a 3% drop. However, economists expect the next quarter will be even worse, as it will more fully reflect the pandemic lockdown’s impact on the economy.
“The question is how the Bank of England is going to look at this economic data and if they will continue to rule out the negative rates and if they will expand their loose monetary policy further. But currency traders are more focused on forward-looking factors such as the Prime Minister’s three-stage plan to open the economy,” said Naeem Aslam, chief market analyst at AvaTrade, in a note to clients.
Only a handful of U.K. stocks were in the green, including Sage Group, up 4% after the software company Sage /zigman2/quotes/204528931/delayed UK:SGE +1.11% reported a 39% rise in first half profits, driven by software subscription revenue growth.
The travel and tourism sector was taking another hit on Wednesday, not helped after U.K. Health Secretary Matt Hancock warned on Tuesday that foreign holidays for U.K. residents were unlikely this year and TUI Travel /zigman2/quotes/207049334/delayed UK:TUI +1.62% announced thousands of jobs may go.
Shares of InterContinental Hotels Group /zigman2/quotes/202865596/delayed UK:IHG -0.16% fell 6%, alongside Carnival /zigman2/quotes/210414141/delayed UK:CCL +1.02% , while easyJet.com /zigman2/quotes/202825892/delayed UK:EZJ -0.64% and International Consolidated Airlines Group /zigman2/quotes/208070069/delayed UK:IAG -0.75% fell over 4%.