FTSE struggles as UK enters double dip recession

<p>European shares initially continued their steady climb this morning after relatively well received bond auctions in both Spain and the Netherlands yesterday and forecast beating […]</p>

European shares initially continued their steady climb this morning after relatively well received bond auctions in both Spain and the Netherlands yesterday and forecast beating corporate results, enabling the benchmark UK index to continue to bounce back from Monday’s low of 5658.

By 10.30am GMT, the FTSE 100 had rallied 15 points – taking into account 6.8 points that have been knocked off the FTSE 100 Index as a result of stocks going ec-dividend – whilst the DAX rose 1.33%.

The gains were however tempered by UK first quarter GDP results (released at 9:30am GMT), which came in worse than expected leading to initial knee jerk reaction selloff of the blue chip index. The Gross Domestic Product reading was expected to be reported at +0.1% following the previous quarter’s figure of -0.3%. However, the actual figure for the first quarter came in at is -0.2% (contraction), confirming that technically we are now in a double dip recession.

Although this figure is lower than expected it is not necessarily a huge surprise as the UK economy has really struggled to pick itself up since the start of the crash in 2008, confirming the slowest recovery from any crisis. The news that we are in a double dip recession is unlikely to be well received and is likely to have an additional effect on consumer confidence and so therefore we need to be mindful of any second term effect on consumer spending going forward.

In the meantime investors will be turning their attention back to corporate earnings season and looking for signs as to whether the market can recover from lows not seen since December last year, which have been recently revisited. Apple posted an increase in earnings after the bell yesterday, which has in turn seen ARM Holdings (provider of Apple Smartphone chips) receive several broker upgrades; it’s shares subsequently lead the FTSE 100 leader board with gains of over 4%. Standard Life saw assets under management rise more than the market expected in first quarter of 2012 causing its shares to advance over 1.5% and Capital Shopping Centres still managed a rise this morning despite a 2% fall in footfall at its centres.

FTSE 250 companies reporting have shown early promise as well. Sports direct exceeded management expectations with quarterly sales rising over 13%, compared to a previous quarter’s growth of 9%, whilst Bodycote and UBM traded higher as they reported good solid performances.

This afternoon attention will turn to US March durable goods orders to be released at 1:30pm GMT, but the main focus will be on the FOMC announcement on interest rates and liquidity due after the close of European market.

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