UK stocks up on GDP joy and mining rally, metal prices continue to rise, Asia hit by rate worries and banks to kick off US reporting season

“There were divergent fortunes for the UK and Asia as the trading week drew to a close,” says Russ Mould, Investment Director at AJ Bell.

“The second monthly GDP increase in a row for the UK has triggered a ticker tape parade from investors as they become more hopeful the country will come out of recession.

“Both the FTSE 100 and the more domestic-focused FTSE 250 index jumped 0.8% at the market open, indicating investors are happy that the economy is moving forward, albeit at a snail’s pace. Some growth is better than no growth at all. It shouldn’t take much for the FTSE 100 to move through the 8,000 mark.

“Housebuilders and supermarkets were in demand as investors took the view that a stronger economy will give a boost to consumer confidence and provide a better backdrop for spending.

“Miners also helped to give the FTSE 100 a lift as copper prices continued to climb thanks to the twin engines of supply fears and brighter demand prospects.

“At the same time, gold prices extended their recent rally as investors took the view that the global market situation warranted owning the precious metal. Central banks have been busy stocking up on gold and investors have followed suit, believing that the asset will come in handy if we continue to see a volatile period on the markets as the timing for interest rate cuts is pushed further back.

“Indeed, fears about delayed rate cuts were behind a sell-off in parts of Asia on Friday. The Hang Seng index fell 1.9%, dragged down by companies in the real estate, utilities and financials sector. Basic materials – which is predominantly made up of miners – was the only sector to be in positive territory.

“The banking sector kicks off the US reporting season later today with JPMorgan, Wells Fargo and Citigroup among the names issuing quarterly results. A resilient economy might be a positive backdrop for the sector but the fact interest rates have remained high raises the risk that consumers and businesses might be under increasing financial pressure.

“More people have been buying on credit which bodes well for the likes of Citigroup as a big player in the credit card market, but also means bad debts will be something to monitor. Investment banking operations across the sector will be closely watched to see if activity has improved and fees have gone up.”

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