UK GDP Growth Expands Less than Expected – FTSE Rally Stalls

Economic expansion slows in the UK leaving investors with mixed feelings about the stock market.

GDP Growth YoY grew by 0.7% after last month’s reading of 1.4%, just shy of analysts’ forecasts of 0.8%. While the preliminary reading for GDP Growth for Q2 increased to 0.9% up from the last reading of 0.3%.

The mixed data for economic activity left the market with uncertainty as to just how well the economy is doing. Also leaving doubts as to how the BoE would read this data in view of further rate cuts for this year.

The FTSE opened down 0.26% from yesterday’s close, but the GDP data this morning pushed the index higher by 0.36% after its release. Some investors view the GDP data as sufficiently subdued to allow for another rate cut.

While others can take the view that economic expansion should lead to increased price pressure and the central bank would take a pause on future rate cuts. For now, most of the bullish sentiment comes from the AI-tech rally and dovish Fed stance.

Both factors have helped global stocks recover much of the lost ground after the correction that led markets to recent lows. The UK market is also contemplating the possible effects of the new Labour party government’s spend and tax policies.

Technical View

The day chart below for the FTSE shows a market in a major correction which has found resistance at the Ichimoku cloud. Today’s candle has stalled at the top of the cloud, for now.

However, yesterday’s candle broke above the cloud and above a resistance level of 8.278 (blue line). The close is an indication that we may see further highs from here, but if today’s candle fails to close above the previous we may see a correction lower first.

The market would find some immediate support on the bottom of the cloud. If the support level breaks then the next support would come from the previous support level at 8,036. To the upside, the next resistance level would come from a previous high of 8,411 (red line).