UK Stocks Recover at End of Week on Strong Economic Data
London shares gained on Friday, with the blue-chip FTSE 100 up 0.35% at closing, after better-than-expected UK gross domestic product and other economic data.Figures from the Office for National Statistics showed that the monthly expansion in the UK's gross domestic product accelerated to 0.4% in July from 0.3% in June. The data exceeded expectations, with analysts anticipating no growth for the month. The economy rose 1.6% year over year in July."Stronger-than-expected growth in July suggests that the economy carried some of its first-half momentum into Q3," said Confederation of British Industry Senior Lead Economist Ben Jones. "But although the economy has proved more resilient to the fallout from the Middle East conflict than initially seemed likely, the second half of the year looks a bit more challenging. Higher household energy bills are beginning to bite, while volatile energy markets and a global bond-market sell-off are adding to uncertainty and pushing up borrowing costs."Elsewhere, the UK's total goods and services trade deficit in the three months to July stood at 9 billion pounds sterling, down 1.1 billion pounds from the three months to April.Meanwhile, the UK's services output increased 0.4% month over month in July, matching the previous month's growth, while production output rose 0.2% after declining 0.2% in June. Construction output recovered, with an uptick of 0.1% in the reporting month, compared with a dip of 0.1% in the month before.Following the latest batch of economic data, Danske Bank affirmed its expectations that the Bank of England will maintain the bank rate until the second quarter of 2027."Our base case remains for an unchanged Bank Rate until Q2 2027, when the BoE can resume the cutting cycle and deliver another 25bp rate cut. A Bank Rate of 3.75% is already restrictive and we are more sceptical about the growth outlook for H2. If energy markets do not improve and the economy continues to look resilient, then we would expect a rate hike, even in the absence of spillovers to broader price-setting. The cost of an "insurance hike" has declined over recent months," Danske Bank commented.On the corporate front, Shell (SHEL.L), through its Norske Shell business, applied for exploration licenses under the 2026 licensing round of Norway's energy ministry for the Norwegian continental shelf. Shell is among the 21 energy companies vying for the rights to explore 70 blocks in the area, with the successful bidders expected to be named in early 2027. Shell gained 0.31% at closing.
