LONDON MARKETS: FTSE 100 Shakes Off GDP Data, Falls 0.5%

By Sara Sjolin, MarketWatch

LONDON (MarketWatch) -- Downbeat earnings reports from major U.K. firms such as Unilever PLC, SABMiller PLC and BT Group PLC drove the FTSE 100 index lower on Thursday, offsetting a solid reading on the U.K.'s second-quarter economic growth.

The benchmark lost 0.5% to close at 6,587.95, after snapping a three-day losing streak on Wednesday.

Among notable movers in the index, shares of Unilever (UN) (UL) shaved off 1.6% after the consumer-products firm warned economic conditions remained difficult throughout its markets.

SABMiller PLC , the maker of Miller Genuine Draft and Peroni Nastro Azzurro, fell 2.5% after the company said cold weather hit its beer demand across developed markets in the fiscal first quarter.

Shares of BT Group dropped 2.2% after the telecoms firm reported a 16% decline in first-quarter pretax profit.

Mining firms also declined. Glencore Xstrata PLC dropped 2.3% and Anglo American PLC lost 3.4%. Heavyweights Rio Tinto PLC (RIO) and BHP Billiton PLC (BHP) fell 1.9% and 1.5%, respectively.

On Wednesday, several South African mine unions said they were one step away from embarking on a strike against gold producers amid wage negotiations.

The losses overshadowed an upbeat reading on U.K. second-quarter gross domestic product. The Office for National Statistics said the economy expanded by 0.6% in the past quarter, meeting analysts' expectations and building on a 0.3% gain from the first three months of the year. The data showed the four sectors of the economy -- services, agriculture, industrial production and construction -- all expanded, the first time all have done so in almost three years.

"The debate will now move on from a misplaced obsession with so-called double and triple dips, to whether the weakest recovery on record is finally gathering pace," said Ian Kernohan, economist at Royal London Asset Management.

"Stronger data from Europe will add to the sense that the U.K. economy has finally turned a corner, although the new Governor of the Bank of England will be keen to stress that a rise in interest rates is still a long way off, in order to allow time for the recovery to gain traction," he added.

Among gainers in London, shares of Shire PLC climbed 5.5% after the biotech company reported a 14% rise in second-quarter pretax profit.

Shares of Rolls-Royce Holdings PLC jumped 5.1% after the engine maker said pretax profit climbed 34% on an underlying basis and backed its prior full-year guidance.

Reed Elsevier PLC gained 4.2% after the publishing firm increased its interim dividend and said it remains on track to deliver on its strategic and financial priorities.

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