LONDON MARKETS: FTSE 100 Rises, On Track For Fresh 2016 Closing High

By Carla Mozee and Victor Reklaitis, MarketWatch

U.K. GDP expands in runup to Brexit vote

U.K. stocks headed for a second day of gains Wednesday, as investors weighed corporate earnings reports and the prospects for central bank action.

Equities held to gains after U.K. gross domestic product for the second quarter outstripped expectations. The preliminary reading was in particular focus as it provided a snapshot of the economic situation in the runup to and just after the Brexit (https://brexit.efinancialnews.com/) referendum on June 23.

The FTSE 100 was up 0.8% at 6,776.32, putting the blue-chip index on track for its highest close in 2016. The gauge on Tuesday closed 0.2% (http://www.marketwatch.com/story/ftse-100-edges-higher-as-sabmiller-gains-but-oil-major-bp-loses-ground-2016-07-26) higher.

Trading got underway amid reports that Japanese Prime Minister Shinzo Abe plans to introduce an economic stimulus plan worth more than Yen28 trillion yen next week (http://www.wsj.com/articles/japan-govt-mulling-issuance-of-50-year-debt-sources-1469589748). And after the close of European trade, the U.S. Federal Reserve is slated to release its policy decision. Expectations are for the Fed to hold off on raising interest rates.

The "assessment of the Brexit risks to the U.S. and global economy will be key to keeping the door open for any rate rise in 2016," said James Ruddiman, director of forex advisory at Audere Solutions, in a note.

Read:Why the Fed may want to reach for the stock market's punch bowl (http://www.marketwatch.com/story/why-the-fed-may-want-to-lurch-for-the-punch-bowl-2016-07-26)

Movers: Earnings reports continued to roll in Wednesday. ITV PLC and home builder Taylor Wimpey PLC were among the companies whose shares gained after their results.

ITV shares (ITV.LN) surged 8%, on course for their best session since November 2012, according to FactSet. First-half net profit fell to GBP243 million ($319 million) on costs, but revenue rose on the expansion of its production business (http://www.marketwatch.com/story/itv-profit-falls-on-costs-as-revenue-jumps-2016-07-27). ITV's programs include "Downton Abbey" and "The X Factor".

Taylor Wimpey (TW.LN) pushed up 7.8% after the company said it remains committed to its dividend policy (http://www.marketwatch.com/story/taylor-wimpey-profit-up-13-backs-dividend-policy-2016-07-27) and posted a 13% rise in half-year pretax profit.

But decliners included GKN PLC (GKN.LN) as the car and plane components maker posted flat half-year profit of GBP163 million pounds (http://www.marketwatch.com/story/gkn-profit-flattens-out-2016-07-26)($214 million). But revenue rose and GKN raised its dividend. The stock was down 1.6%.

GDP: The first reading of second-quarter U.K. GDP showed quarter-over-quarter growth of 0.6% (U.K.%20economic%20growth%20picked%20up%20pace%20ahead%20of%20Brexit%20referendum). That was above expectations of 0.4% in a Wall Street Journal survey of economists, and higher than growth of 0.4% in the first quarter.

The report's headline figure "masks the contribution from a 2.1% q/q surge in industrial production, which we see as unlikely to be sustained," said Chris Hare, economist at Investec, in a note.

The GDP data follow last week's report from Markit showing contraction in both the manufacturing and services sectors in July (http://www.marketwatch.com/story/uk-economy-in-dramatic-downturn-after-brexit-vote-data-show-2016-07-22).

Since the Brexit vote, it appears there has been "near-unanimity" in calls by Bank of England policy makers "for more stimulus in response to a prospective weakening in the economy," said Hare. "We see a 25 basis points rate cut at the next Monetary Policy Meeting meeting ... alongside a package of other measures."

The Bank of England will meet Aug. 4.

The pound was little changed, buying $1.3127 compared with $1.3139 late Tuesday in New York.

(END) Dow Jones Newswires

July 27, 2016 09:54 ET (13:54 GMT)

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