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Pound lower as UK mired in record recession

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The British pound fell against the dollar and euro on Wednesday as official data showed Britain’s coronavirus-ravaged economy suffering its deepest recession on record. PHOTO: Getty images

The British pound fell against the dollar and euro on Wednesday as official data showed Britain’s coronavirus-ravaged economy suffering its deepest recession on record.

London’s benchmark FTSE 100 index, featuring multinationals earnings in dollars, rallied for a second day running.

Britain’s economy shrank by a fifth in the second quarter, more than any European neighbour, and following two quarterly contractions in a row was officially in recession.

Losses for the pound were limited by official data showing British GDP output growth of 8.7 percent in June — the final month of the second quarter — as the economy slowly emerged from its lockdown implemented in late March.

“The figure for June is key, as we all knew that lockdown measures would have a big impact on the economy but what we still don’t know is how quickly the UK will rebound,” said AJ Bell analyst Laura Suter.

“Figures showing GDP growth of 8.7 percent in June are encouraging,” she added.

US-China focus
Eurozone stock markets built on Tuesday’s strong gains and Asian indices closed mixed, with worries that US lawmakers may not agree to a fresh stimulus deal any time soon offsetting optimism about upcoming US-China trade talks.

Both governments are meeting this weekend to review their much-vaunted trade pact, which had been a cause for concern among investors owing to ongoing tensions between the superpowers.

US President Donald Trump’s top economic adviser said the pact was “fine right now”.

Larry Kudlow told reporters that despite the tensions, “one area we are engaging is trade”.

He added that Beijing had vowed to stick to its promises on the January trade deal and there was evidence it was increasing purchases.

Analysts said easing concerns about the future of the US-China trade pact and healthy China data provided some cheer to investors, giving them the confidence to shift out of havens such as gold and the yen.

Gold prices extended the previous day’s sell-off on profit-taking and owing to a pick-up in the dollar, which had been hammered through July to push the yellow metal to multiple records.

Meanwhile, optimism that US lawmakers will thrash out a new stimulus package to accompany Federal Reserve’s ultra-loose monetary policy is waning.

Senate Majority Leader Mitch McConnell gave traders a jolt when he told Fox News there had been no progress, fanning concerns the talks could take a lot longer than envisaged.

Key figures around 1145 GMT
Pound/dollar: DOWN at $1.3024 from $1.3047 at 2045 GMT

Euro/pound: UP at 90.33 pence from 89.94 pence

Euro/dollar: UP at $1.1765 from $1.1734

Dollar/yen: UP at 106.94 yen from 106.50 yen

London – FTSE 100: UP 1.3 percent at 6,231.52 points

Frankfurt – DAX 30: FLAT at 12,945.73

Paris – CAC 40: UP 0.4 percent at 5,048.66

EURO STOXX 50: UP 0.3 percent at 3,341.36

Tokyo: Nikkei 225: UP 0.4 percent at 22,43.96 (close)

Hong Kong: Hang Seng: UP 1.4 percent at 25,244.02 (close)

Shanghai: Composite: DOWN 0.6 percent at 3,319.27 (close)

New York – Dow: DOWN 0.4 percent at 27,686.91 (close)

West Texas Intermediate: UP 1.5 percent at $42.22 per barrel

Brent North Sea crude: UP 1.4 percent at $45.11

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