FTSE Hits 6 Month High On Chinese GDP and Weak Pound

 3 European Union flags between 3 UK Union Jack flags
Fiona Cincotta
By :  ,  Senior Market Analyst

The FTSE surged to a 6-month high boosted by a falling pound post dire retail sales data and amid broad risk on sentiment following Chinese GDP data. NMC topped the index whilst miners also featured heavily on the gainers’ board.

Chinese GDP In Line Lifts Risk Sentiment
Economic growth in China touched a 29-year low at 6.1% in 2019, down from 6.6% in 2018. The fact that GDP was in Line with expectations an offered no nasty surprises, despite the US – China trade dispute running across the year, has left investors relieved. The data comes just two days after the signing of the US – China trade deal which should help to put a floor under risks to the manufacturing sector. There are still signs of distress in other areas of the economy such as the banking sector as financial risks continue to accumulate. 

Pound Slumps Post Retail Sales
Dismal retail sales sent the pound lower across the session. The pound snapped a three-day winning streak which had seen it rally to $1.3118. The data is part of a more sinister picture.  GDP unexpectedly contracted in November, inflation hit a three-year low and UK retail sales recorded a spectacular miss, contracting -0.6% mom rather than a 0.6% gain.  A hattrick of soft data across this week makes an interest rate cut by the Bank of England at the end of the month all the more likely. The pound has weakened reflecting the increased probability of a rate cut. However, sterling remains comfortably above the key psychological level of $1.30.

Rio Tinto Jumps Despite Production Falling
Rio Tinto jumped 3.3% on the back of Chinese GDP reading and following the release of Q4 production results, which focus on shipment and output figures. Iron ore shipment increased 1% QoQ to 86.8 million tonnes. However, production fell to 83.6 million. with declines being attributed to poor weather conditions. Despite the challenges faced in 2019, Rio Tinto remains optimistic on the 2020 outlook. Rio Tinto is up 30% across the year, supported by a 36% increase achieved in iron ore price.

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