FTSE rises despite disappointing economic data

The FTSE 100 saw gains of nearly 1% as miners and banks recovered from yesterdays losses.

The FTSE 100 was up 0.9% at 5477, unmoved by the Bank of England's announcement that it would hold interest rates at 0.5%.

The market's gains came despite data released by the Office of National Statistics this morning showing that the country’s trade deficit, the gap between goods imported and goods exported, had widened.

The recent figures are for July and show an £8.7 billion gap, up from £7.5 billion in June.

Philip Shaw, chief economist at Investec, told Bloomberg the figures were ‘a disappointment’. He said: ‘Overall the great rebalancing of the U.K. economy has yet to happen. The bank will be frustrated that the long- awaited upturn in export growth simply hasn’t happened.’

Eight of the FTSE 100's 10 largest constituents, which make up around 45% of its value, saw gains this morning. The most significant were the miners, recovering after being hit by fears that the Australian government could impose a 30% tax on mining profits.  Rio Tinto shares are up 2% at £35.49 and BHP Billiton shares are up 1.77% at £19.23.  

The FTSE 100’s biggest gainer was Arm Holdings. The chip designer’s shares rose after it unveiled a new processor and listed Texas Instruments as the first licencee. Arm’s shares rose by about 4% to 402p.

Lloyds bank was also amongst the FTSE 100’s top ten gainers. The bank’s shares rose on reports that it could sell its £150 million stake in housebuilder Crest Nicholson.  Lloyds shares were up nearly 3% at 74p. Royal Bank of Scotland shares were also up 2.5% at 47p.

The biggest loser was Home Retail Group, down 3.25% to 214p. The owner of Argos and Homebase said its half year profits were expected to fall by up to 25% as consumers tighten their belts. The company has also been ejected from the FTSE 100. Communications company Cable and Wireless Worldwide and property company Segro have also been moved down to the FTSE 250.

FTSE announced that the new entrants on the index will be investment firm Resolution, global engineering and manufacturing group Tomkins and engineering solutions business Weir Group.