FTSE slides as US GDP data sparks fears over recovery

London's FTSE 100 Index slipped more than one per cent yesterday after United States figures showed weaker-than-expected growth in the second quarter.

Stocks fell amid fears of a sluggish recovery for the US economy, with the Footsie closing down 55.93 points at 5258.02.

America's gross domestic product (GDP) data showed 2.4 per cent annualised growth between April and June – slightly below the 2.5 per cent forecast by the market – while revisions also showed the US had a deeper recession than first thought.

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Wall Street's Dow Jones Industrial Average plunged almost 120 points on opening, although losses were soon pared back as investors saw positive signs in the economic report.

Analysts commented that there was some good news in the consumer savings rate, which could lead to higher spending in the coming months.

The pound strengthened to more than 1.57 against the dollar as the greenback took a hammering after the GDP data.

Sterling also added 0.7 per cent to 1.20 euros.

In London, the corporate spotlight was on British Airways, which shrugged off a 250m hit from strikes and Iceland's volcanic ash cloud as investors chose to back the signs of recovery.

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Chief executive Willie Walsh's forecast of a break-even performance this year and improving passenger trends helped the shares to add 3.6p to 219.6p, or two per cent, putting it among the top risers.

Mr Walsh pointed to falling operating costs – helped by a lower fuel bill – and added: "Our focus must remain on cost control as we grow and continue our quest for permanent structural change across the business."

The group received a boost this month when it was given US regulatory clearance for its alliance with American Airlines and Iberia on transatlantic flights, as well as agreeing a recovery plan with regulators for its pension scheme.

A clutch of utility stocks also defied the market falls after an infrastructure fund snapped up the UK's biggest electricity distribution network from EDF in a 5.8bn deal.

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The bigger-than-expected price tag fueled hopes of a renewed appetite for UK assets and helped shares in United Utilities to grow 241/2p to close the day at 585p.

Water firm Severn Trent added 30p to 1310p, while in the FTSE 250 South West Water-owner Pennon added 121/2p to 590p.

The late session sell-off wiped out early gains for some stocks, with broadcaster BSkyB ending the day unchanged at 711p after rising more than 21/2p at one stage as Citigroup brokers upped their target price following Thursday's strong results.

Cruise ship giant Carnival also lost advances, down 6p to 2300p, despite positive broker comment as Bernstein analysts said there was too much caution over prospects for the sector.

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Investment bank Investec was among the leading fallers as markets gave a lukewarm reception to its "satisfactory" performance during the first half of the year, leaving shares 12p lower to stand at 495p.

In the FTSE 250, broadband group TalkTalk eased 0.8p to 1221/2p after net new broadband customers fell to 34,000 in the seasonally quieter first quarter of its year.

The firm hopes to boost revenues through a tie-up with Vodafone which will see it offer mobile phone services to its 4.2 million customers.

Elsewhere, London taxi cab maker Manganese Bronze motored 15 per cent higher, or 51/4p to 40p, as the company predicted tough markets for the rest of the year, but a return to profit in 2011 as a cost-saving drive kicks in. Production of body panels and chassis has been moved to China.