British economy returns to growth and Unilever beats expectations

Strong corporate data set the markets off on the right foot this morning, with the major European indices all pushing higher.

Unilever, AstraZeneca and miners all gave heavyweight support to the FTSE 100 after reporting updates that were well received by the market.

Unilever shares topped the FTSE leader board, gaining 2.9% after reporting that underlying sales growth beat expectations in the third quarter, supported mainly by a strong performance in emerging markets. Sales rose 5.9% beating consensus of 5%, however they warned of ongoing global uncertainty and that the environment remains challenging, which comes as concerns over a slowdown in emerging markets have started to weigh on the sector.

AstraZeneca also beat earning expectations in the third quarter and maintained its full year targets, pleasing the market with shares trading up 0.7% as a result. At the same time miner Anglo American reported third quarter production increased across 5 of its 7 commodities. They performed broadly in-line with other large diversified miners but warned of short term volatility in the commodity markets due to economic uncertainty.

Cameron’s boast proves correct as GDP bounces back
However the main focus for today was the GDP figures given PM David Cameron’s boast yesterday that the good news will continue. GDP data showed that the UK rebounded strongly out of recession in the third quarter, recording its strongest quarterly gain in 5 years. UK GDP increased by 1%, beating expectations of 0.6% growth after shrinking 0.4% in the second quarter. The Olympics have been cited as a major reason for the jump in growth and could actually be masking a weaker underlying picture. Stripping out this Olympic affect could show a much more frail economy struggling against the problems of Europe, and weak data from Europe and indeed the CBI yesterday suggests there is still a long way to go.

This positive reading could have the effect of pushing the Bank of England away from further stimulus at its November meeting or even scale back the size of any increase in its asset purchase facility. However, Mervyn King, the governor of the bank of England, suggested that the MPC is ready to act if the recovery falters. Only yesterday he said “at this stage, it is difficult to know whether some of the recent more positive signs will persist. Should those signs fade; the MPC does stand ready to inject more money into the economy.”

Looking towards the afternoon session, the US reporting season will continue to take centre stage with Apple, Procter & Gamble and Amazon amongst the big names reporting.