FTSE 100 breaks five-week winning streak and oil crashes into bear market as oversupply bites

UK-based industrial group Essentra surrendered more than a fifth of its value after it warned on profits for the second time in two months.

The FTSE 250 company see like-for-like full-year revenue falling by mid single-digits due to challenging trading conditions. It now expects operating profit for the year to be in the range of £155m and £165m.

Revenues for the first half of the year dropped by 1pc to £545m, while pre-tax profit fell 6pc to £43m due to “a number of challenges” experienced in its filter products and health and personal care businesses. However, management remain confident the mid-cap company can deliver “a stronger result” in the second half of the year.

Essentra also noted it is working towards finding a successor for current chief executive Colin Day, which is also likely to weigh on the stock’s performance.

In June, the group, which makes cigarette filters and plastic packaging products, suffered its worst day ever after it warned on profits blaming delays in large projects and a difficult trading backdrop.

Shares were dealt another blow earlier in the week after JP Morgan slashed its rating to “neutral” on the back of its June profit warning and ongoing business review. Analysts also noted economic conditions are “unlikely to be incrementally helpful”.

In its wake, the FTSE 250 stock surrendered 141.5p, or 22.6pc, to 485p.

On the wider market, the FTSE 100 had a muted trading session, edging up 3.37 points to 6,724.43 by close, on the back of mixed corporate earnings. However, the blue chip index broke its five-week winning streak, posting a weekly loss of -0.9pc.

British lender Barclays became the biggest FTSE 100 riser, up 8.1p to 154.6p, after it posted pre-tax profit growth of 19pc in the first half of the year. Analysts at Jefferies noted the bank had produced a 6pc pre-tax profit beat in  its core business in the second quarter.

SABMiller also inched 90p higher to £44.14 after its board recommended the revised all cash offer of £45 per share from ABInBev.

On the other side, education group Pearson missed its half-year sales target sending shares 88p, or 9.1pc, to 882p. Underlying sales fell 7pc to $1.87bn, compared with consensus forecasts of a 5pc decline. In its wake, Liberum reiterated its “sell” warning, with analyst Ian Whittaker, adding: “The risk of another profit warning for Pearson for 2016 appears relatively high.”

Elsewhere, Indivior, the company that makes opioid addiction treatment drugs, climbed to a record high of 296.1p, up 23.6p, on the day after it hiked its full-year revenue forecast to between $1 and $1.3bn on following strong half-year results.

Meanwhile, the Nick Candy backed broadband provider Satellite Solutions Worldwide dipped 1p to 6.5p after it announced a “12.1m placing to fund the acquisitions of SkyMesh and Breiband.  

Finally, Aim-listed Independent Oil and Gas jumped 4.3pc to 21.4p industry heavyweight David Peattie, formerly of Fairfield Energy and BP, joined the board as chairman.

On that note, it's time to close up for the evening. Thanks for following us this week. 

Despite disappointing eurozone GDP data and little action from the Bank of Japan, European bourses have ended the week in positive territory. 

By close: 

• FTSE 100: +0.05pc
• DAX: +0.59pc
• CAC 40: +0.32pc
• IBEX: +1.2pc

Reflecting on today's trading session, Joshua Mahony, of IG, said:

"Inflation and GDP data out of the Eurozone painted a pretty sombre picture for the ECB, who have certainly played their part in trying to rescue the region from the grips of deflation and slowing growth for years.

"Unfortunately it feels as though central banks are only just starting to realise the futile nature of their craft, with QE seemingly helping markets more than growth or inflation. Certainly QE has helped raise inflation expectations, yet until we see a substantial rise in growth and inflation, we will see ultra-low rates and QE in place for some time yet."

Here's our full report on US GDP data from economics correspondent Peter Spence: 

Hopes of US interest rate rises were pushed into the distance on Friday, as figures showed that the world’s largest economy had slowed sharply and was near stagnation for almost a year.

The  US economy grew by just 0.3pc in the three month period to the end of June, according to the Bureau of Economic Analysis (BEA). Economists had anticipated that the US economy would expand at more than twice this pace. On an annualised basis, growth was 1.2pc, which was also well below forecasts.

Growth was held back by a third straight quarter of falls in business investment, and a $8.1bn (£6.1bn) drop in inventories in the second quarter, as firms chose to decrease their stocks. The BEA also revised down its estimate for first quarter growth, from just under 0.3pc to 0.2pc.

Paul Ashworth, of Capital Economics, said that the data showed the US economy had been “close to stagnant for almost a year”, with growth of only 1.2pc over the last 12 months.

Read more here

Here's an interesting view from Mike van Dulken, of Accendo Markets, ahead of the much anticipated rate cut next week by the Bank of England. 

"Pretty much everyone expects stimulus via more QE (up from its last monthly amount of £50bn in 2012) and maybe even widening the scope of assets to include corporate bonds given how overbought and low yielding UK gilts have become.

"Many believe a rate cut is also on the cards but we see good reasons not to bother."

Here are the reasons given by Mr van Dulken:

1. Wwould it really help, given how low rates have been since the FTSE bottomed in March 2009? Will it make anyone more likely to spend/invest?
2. Why inflict more pain on the banks, especially the bailed out Lloyds which the government still holds a 10% in and is desperate to unload but unable to while the shares languish 20p offside? A rate cut won’t help the share price its profitability is dented by further squeezing still depressed Net Interest Margins.

"Don’t do it Mark. It’s not worth it, " he concluded.

As investors digest disappointing US GDP data this afternoon, they are beginning to look towards 'Super Thursday'. Connor Campbell, of Spread Ex, comments: 

"The US GDP miss also impacted sentiment in Europe, which was already on shaky ground following the Eurozone’s growth glumness this morning. The FTSE (which has seen a 10.5% plunge from Pearson join the strain placed on the index by its red-washed commodity sector) and the CAC both fell around 0.5%, while the DAX sat flat on the day.

"While the past GDP-dominated week hasn’t really yielded too much movement, things may well be different next week. Jitters will likely abound in the first half of the week, as investors prepare themselves first for a potentially rate-cutting ‘Super Thursday’ from the Bank of England, and then the US non-farm jobs report on Friday, which is back in the spotlight following Wednesday’s surprisingly upbeat Fed statement. Those two events could cause some big swings for the pound and, dependant on how robust Carney and co. are with their stimulus, may see the FTSE resume its climb towards 6800."

Merger and acquisition activity in the mining industry could be showing a flicker of life after FTSE 100 giant Anglo American reportedly brushed off an approach from Vedanta Resources chairman Anil Agarwal, concluding that a combination of the two companies made little sense.

Mr Agarwal, the Indian billionaire behind the sprawling Vedanta conglomerate, made a number of informal approaches to the South African group earlier this year to discuss potential tie-ups, but talks were “quickly dismissed”, according to Bloomberg, which first reported the matter.

FTSE 250-listed Vedanta Resources specialises in zinc mining but also produces copper, iron ore, oil and gas. It recorded a pre-tax loss of $4.98bn (£3.45bn) for the year to March 31 as tumbling commodity prices took their toll. Vedanta’s focus has been on cutting costs as it attempts to wrestle down its debt pile, which stood at $7.3bn in March.

Anglo American has been tackling a debt pile of its own, selling off assets and cutting its dividend to bring its net debt down to $11.7bn in the first half of this year.

Report from Jon Yeomans (Read more here)

Speaking in Cambridge, Massachusetts this afternoon, San Francisco Fed president John Williams has said that global spillovers are now "a bigger consideration for US rates". 

He said the path of rate hikes is shallow in part due to lower expected long-term rates. The 'new normal' of low rates means that the amount of monetary accommodation is "less than it may appear to be". 

Williams also said the growth rate is "significantly slower" across advanced economies. 

He added that negative rates in the US are very unlikely and he expects the Fed to raise rates over the coming years. 

The Chicago Purchasing Managers Index slipped by to 55.8 this month, beating consensus forecasts of a fall to 54.0.

Last month, the index rose to its highest level since January 2015 hitting 56.8 following a surge in new orders and production. 

Anything above 50 reflects expansion, while below this level reflects contraction. 

The opening bell on Wall Street was little welcomed as disappointing earnings and slower-than-expected US growth weighed on stocks. 

At the opening bell: 

• Dow Jones: -0.24pc
• S&P 500: -0.08pc
• Nasdaq: +0.14pc

Returning to the disappointing US GDP data, Lukman Otunuga, of ForexTime, comments on the soft Q2 figueres: 

"Sentiment towards the US economy was dealt a jab during trading on Friday following the soft second quarter GDP result of 1.2pc which widely missed expectations and renewed concerns over the health of the US economy. This unexpected rate of growth goes against the hawkish FOMC statement and may potentially diminish optimism towards the Federal Reserve raising US rates in 2016.

"Although the outlook for the US economy still looks somewhat encouraging, future domestic data may have to repeatedly exceed expectations for the Fed to break the chain of central bank inaction. The Dollar was left vulnerable after the weak GDP release and could be set for further declines until NFP next week Friday. It should be kept in mind that the engine behind the Dollars resurgence has been US rate hike expectations and if this starts to fade, then bears may waste no time to drag the currency lower."

Following the US GDP data miss, gold has rallied by more than 1pc to its highest level since July 12 of $1,348.60 an ounce. 

Earlier today, the precious metal was languishing below $1,335.

Danske Bank this so! Although US oil investments in the second quarter have fallen 58pc year-on-year, analysts at Danske Bank think it could stabilise in the second half of the year. 

The UK’s exports have grown at a world-beating pace for the first time in nearly a decade, according to official figures, as businesses rapidly increased the share of goods they sold outside of the European Union.

The success of British firms in repositioning to markets further afield has helped boost overall export growth above the global rate of expansion for the first time since 2006, according to the Office for National Statistics (ONS).

The UK’s success came at a fraught moment for global trade as a whole, as world export growth fell behind overall economic growth for the first time in 14 years. The figures suggested that the country's exporters were already moving towards non-EU markets ahead of this year's EU referendum result.

While Britain has sold slightly more goods outside of the EU than within it for the last four years, the share of exports heading out of the customs union increased sharply in 2015. UK businesses sold £151bn of goods to countries beyond the EU last year, compared with just £134bn purchased by EU members.

Report from Szu Ping Chan and Peter Spence (read more here)

Away from US GDP... Earlier today, oil crashed into bear market territory amid oversupply concerns, having plunged some 20.4pc since June 8 . The latest slide in oil puts it on course for six consecutive days of losses for the fourth time this year.  

Does the GDP miss, mean a Fed rate hike is off the table this year? Here's some reaction from Twitter:  

But we've been reminded the Fed hiked rates in a quarter when GDP rose at a slower rate:

The US economy grew far less than expected in the second quarter as inventories fell for the first time since 2011, but a surge in consumer spending pointed to underlying strength.

Gross domestic product increased at a 1.2pc annual rate after rising by a downwardly revised 0.8pc pace in the first quarter, the Commerce Department said on Friday. The economy was previously reported to have grown at a 1.1pc pace in the first quarter.

Economists polled by Reuters had forecast GDP growth rising at a 2.6pc rate in the last quarter.

While the drop in inventories weighed on GDP growth last quarter, that is likely to provide a boost to output for the rest of the year. The Federal Reserve said on Wednesday that near-term risks to the economic outlook had "diminished."

The government also published revisions to data going back to 2013 through the first quarter of 2016. The revisions partially addressed measurement issues, which have tended to lower first-quarter GDP estimates. GDP growth in the first quarter of 2015 was revised sharply higher to a 2.0pc rate from the previously reported 0.6pc pace.

Consumer spending was responsible for almost all of the rebound in GDP growth in the second quarter. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 4.2pc rate. That was the fastest pace since the fourth quarter of 2014.

That rate of growth is probably unsustainable, but economists say a tightening labor market, rising house prices and higher savings should underpin spending for the rest of 2016.

Report from Reuters

Ahead of Q2 US GDP data (which is expected to come in at 2.6pc), Mike van Dulken, of Accendo Markets, previews the event: 

"This afternoon, US GDP Annualised (QoQ) is seen on a roll with consensus of 2.6pc against a reading of 1.1% in Q1. Personal consumption also seen up which is all good for the US economy and could well bring Fed hawks out of their nests (even though they won’t raise rates just like that, they might start preparing markets…) so watch US equity markets around that one. Any inkling of cheap money for not much longer  and all that…

"Rounding off the afternoon we’ve got US Chicago PMI which looks to be pulling back yet comfortably above the 50 watershed that separates growth from contraction. With Uni of Michigan Sentiment looking for a break back above 90, it looks like it’s all go in the US! The Baker Hughes Rig Count is set to kick the oil price in whichever direction it sees fit with its counting game. Here endeth July."

Ahead of the data release, here's a look at how Wall Street is expected to open: 

Shares in Pearson have plunged to the bottom of the blue chip index, down 9.9pc to 874.5p, after the education group missed its half-year sales target. 

Underlying sales fell 7pc to $1.87bn. This compares to analysts expectations of a 5pc fall. 

David Reynolds, of Jefferies, said: "We don't think the H116 print really moves the needle and some swings and roundabouts dynamics visible. Modestly softer revenue outturn in H1, -7pc at Group, -9pc in the US, balanced by the prospect of FX driven guide raise to 54p/59p from 50p/55p. Investors need the H2 to make the early call on the success or otherwise of the change initiatives being driven through Pearson.

Here's the full report on Pearson

Over in Dublin, three Irish bankers have been jailed for  their role in a conspiracy to artificially inflate the books of Anglo Irish Bank by €7.2bn during the 2008 financial crisis. 

Reuters has the latest: 

Three senior Irish bankers were jailed on Friday for up to three-and-a-half years for conspiring to defraud investors in the most prominent prosecution arising from the 2008 banking crisis that crippled the country's economy.

The trio will be among the first senior bankers globally to be jailed for their role in the collapse of a bank during the crisis.

The lack of convictions until now has angered Irish taxpayers, who had to stump up 64 billion euros - almost 40 percent of annual economic output - after a property collapse forced the biggest state bank rescue in the euro zone.

The crash thrust Ireland into a three-year sovereign bailout in 2010 and the finance ministry said last month that it could take another 15 years to recover the funds pumped into the banks still operating.

Former Irish Life and Permanent Chief Executive Denis Casey was sentenced to two years and nine months following the 74-day criminal trial, Ireland's longest ever.

CK Hutchison, the owner of the mobile operator Three, is mounting a formal legal challenge to the EU's decision to block its £10.25bn attempt to acquire O2.

Proceedings against the European Commission are due to be issued as soon as this afternoon at the European Court of Justice, industry sources said.

The challenge comes after officials in Brussels blocked Hutchison's takeover of O2 in May over claims a combination with Three would damage competition in the UK mobile market.

The decision appeared to signal a major shift the European Commission's previous attitude to mobile mergers. It had previously approved comparable deals in Ireland, German and Austria.

Report by Christopher Williams (Read more here)

Britons bought fewer houses in June than in any month since May 2015, indicating that nervousness around the EU referendumweighed down the housing market.

A total of 64,766 properties were bought in the month, according to the Bank of England, down 3pc on the previous month and down 4.5pc from the 67,861 houses bought in June of 2015.

Buyers borrowed £11.2bn to buy the homes in June, a 3pc fall on the month before and the lowest level of borrowing since May 2015.

There was a sustained rise in remortgaging, however, as those who already own properties switched to cheaper loans as interest rates continued to fall.

Official figures show 43,102 homeowners borrowed £7.5bn to remortgage – the biggest sum since October 2008 - to take advantage of ultra low interest rates.

Report by Tim Wallace (Read more here)

It was a mixed picture across financial markets in Europe, as some bourses advanced on the back of robust corporate earnings, shrugging off disappointing eurozone growth figures and a sharp slide in oil prices.

The FTSE 100 became the only exception, falling into the red on the back of disappointing trading updates. It is now on track to end its five-week winning streak. 

At midday: 

• FTSE 100: -0.18pc
• DAX: +0.35pc
• CAC 40: flat
• I BEX: +1.35pc

 Connor Campbell, of SpreadEx, said: "The markets struggled to find one way to react to the latest Eurozone GDP data this Friday morning.

"Given the state of the stagnant French GDP figures this morning the Eurozone will likely take the 0.3pc growth it managed in the second quarter. That is, however, half of what it produced in Q1, suggesting that either the region was impacted by the run-up to the Brexit or, more likely considering how the UK avoided a pre-referendum slump, has more than a few problems of its own to contend with. Nevertheless the DAX seemed vaguely pleased by the news, rising around 25 points, though the CAC remains in the red following France’s country-specific GDP fluff." 

Russia's energy minister Alexander Novak has said he sees oil prices subdued in the range of $40 to $50 a-barrel this year. 

Speaking after talks with the Iranian Communications and Information Technology minister, Mahmoud Vaez, he said he forecast for balancing oil has not changed from the mid-2017.

"Our forecasts on oil price between $40-50 per barrel correspond to reality," Novak told journalists. 

Estate agent Foxtons has reported a 42pc dive in profits and warned a Brexit-induced slowdown in its main London property market could cool the chain’s hitherto rampant branch expansion plans.

Chief executive Nic Budden said a “prolonged period of further uncertainty” awaits London’s biggest lettings and sales company, which recently spooked investors with a profit warning issued days after the EU referendum result.

“The overall level of property sales made in London during the first half of the year is substantially down,” he said, adding that he did not expect markets to show signs of recovery.

Sales fell 3.1pc to £68.8m in the six months to June 30 and pre-tax profits nearly halved to £10.5m, confirming fears of a slowdown in the capital’s property market in the run up to the vote. Foxtons kept its interim dividend of 1.67p-per-share but did not announce a special dividend like it did last year, when it paid out 3.1p.

Mr Budden said Foxtons was now “reviewing the pace” of new branch openings, drawing questions over Foxton’s long-held policy of aggressively growing its presence in London, where it has opened five new branches so far this year.

Report from Kate Palmer (Read more here)

Oil prices fell to their lowest levels since April on Friday, with on Brent track for its biggest monthly loss since December 2015, pressured by slowing economic growth that threatened to increase a supply overhang of crude and refined products.

Brent crude oil futures LCOc1 were trading at $41.89 by 0908 GMT, down 81 cents, their lowest since April. The benchmark was poised for a monthly loss of more than 15.5 percent, its biggest since December 2015.

U.S. West Texas Intermediate (WTI) crude CLc1 fell 54 cents to $40.60 a barrel, slipping below $41 for the first time since April. It was on track for a roughly 16 percent monthly loss, the biggest in a year.

Both crude benchmarks are now down around 20 percent since their last peak in June. 

The glut in the market has taken the edge off supply disruptions in Libya and Nigeria, particularly as high stocks of oil products had cast doubt on refinery demand.

"Doubts are rife as to whether the oil supply imbalance is indeed slowly drawing to an end," Stephen Brennock of oil brokerage PVM, said.

"Oil prices should eventually resume their upward journey but it will be a subdued affair with the huge stock overhang tempering gains until the end of next year at the very least," he said.

Cheap crude has led refiners to produce lots of refined products, which has pushed down margins in the Americas, Europe and Asia this year, eroding revenues for oil producers and refiners like Royal Dutch Shell RDSa.L, which this week reported a big drop in earnings. 

Benchmark Singapore refinery margins are down 60 percent from their January highs to $4.28 per barrel. Italian oil company ENI said on Friday that its standard refining margin in the second quarter was roughly half the level of last year at just $4.60 per barrel. 

"Margins remain on a negative trajectory ... This seems a clear signal that Atlantic Basin refined product markets are currently oversupplied," Jason Gammel of U.S. investment bank Jefferies said on Friday.

 Report from Reuters

Brent crude has plunged 20.4pc since June 8 as oversupply concerns continue to bite. That means crude has now entered bear market territory. 

It is currently trading at $42.10 a-barrel. 

Eurozone unemployment was unchanged at 10.1pc in June, data showed this morning. 

The figure was in line with consensus. 

Analysts at Pantheon Macroeconomics said: 

"This report shows only minor movements in EZ unemployment compared with last month. Unemployment fell 0.2 percentage points in Spain to 19.9%, which was offset by a 0.1pp increase in Italy. Elsewhere unemployment was unchanged at 4.2pc and 9.9pc in Germany and France respectively. Unemployment is a lagging indicator in the euro area, and we think the headline rate will dip below 10pc in Q3 for the first time since 2011."

Shares in French power company EDF have surged almost 10pc on news the £18bn project to build Hinkley Point power station will be delayed.

The board of EDF – which is 85pc-owned by the French state – narrowly voted to go ahead with massive nuclear power project on Thursday, with the British government expected to agree a subsidy deal today.

But just hours after the 10-7 vote in favour of the project, Theresa May’s government put a fresh hurdle in the way, announcing a new review into whether Hinkley, which will require about £6bn of investment from Chinese investors to get it up and running - is the right choice for the UK.

Greg Clark, the new Business and Energy Secretary, said: “The UK needs a reliable and secure energy supply and the government believes that nuclear energy is an important part of the mix. The Government will now consider carefully all the component parts of this project and make its decision in the early autumn.”

Report from Industry Editor Alan Tovey (Read more here)

With London's benchmark index still in the red, Joshua Mahony, of IG, notes the Bank of Japan has "paved the way for a weak start to trade" this morning. 

"However, much in the same manner as the BoE and ECB decisions, markets typically have the ability to look past short term disappointments to instead focus upon the bigger picture.

"With the chance of a BoE rate cut currently priced in ass 100pc, we are not far away from a fresh bout of monetary stimulus in the UK, which would arguably provide more of a boost to UK markets than any action in Japan.

"The fact that the BoJ undershot market expectations should come as no surprise given the lessons learnt from both the BoE and ECB meetings this month. The BoJ has used every weapon bar the helicopter and there is going to come a time when the BoJ takes stock to consider whether their policies are even making a difference. That time is next month, with Kurodas comments signalling a review over the effectiveness of policies such as negative rates. Could it really be the case that markets expected a further cut but instead were faced with the prospect of a hike?"

The euro climbed to 0.84932 against the pound after eurozone data showed growth in the reigon halved in the second quarter as France ground to a halt.

Here's a look at how the euro has performed so far today: 

Economic growth in the euro zone halved in the second quarter as France ground to a halt, while unemployment held just above 10 percent in June, data showed on Friday.

The EU's statistics agency Eurostat said gross domestic product (GDP) in the 19-country single currency bloc rose 0.3pc quarter-on-quarter in the April-June period, slowing from the 0.6pc growth in the first quarter of the year.

On a yearly basis, euro zone GDP was up 1.6pc, slightly less than the upwardly revised 1.7 percent recorded in the first quarter.

The quarterly reading was in line with the forecasts of economists polled by Reuters, while the year-on-year figure compared with 1.5 percent growth expected by the market.

Eurostat does not publish GDP data on individual euro zone countries with its preliminary estimates, but the French statistics office did release figures earlier on Friday.

They showed growth of the euro zone's second largest came in at a worse-than-expected zero due to weak consumer spending, according to data released earlier on Friday.

In a separate release Eurostat said unemployment in the euro zone was stable in June at 10.1 pc after a slight fall in May, meaning that 16.3 million people were unemployed in June. Youth unemployment dipped to 20.8pc from 20.9 percent in May.

Report from Reuters

Here's our full report on Barclay's Q2 profit slump from Tim Wallace: 

Barclays’ profits dived in the first half of this year as the cost of restructuring started to bite, while the historic PPI mis-selling scandal also flared up again with another £400m bill.

The bank made £2.1bn in the past six months, down 21pc on the same period of 2015. Executives had hoped the additional costs of PPI were coming to an end, but the crisis is not over yet – Barclays has now set aside £7.8bn to deal with mis-selling claims and to refund customers.

Since joining the bank in December chief executive Jes Staley has accelerated plans to dispose of operations around the world, including selling down Barclays Africa and ditching the group’s retail banking operations in countries such as France, Spain and Italy.

UK mortgage approvals fell to their lowest level in over a year last month. 

Data from the Bank of England showed lenders approved 64,766 mortgages in June, that's down from 66,722 in May. 

 However, lending to consumers expanded at its fastest rate in almost 11 years. It rose 10.3pc year-on-year in June. But the British central bank expects credit growth to ease in the second half of the year as the economy grapples with life post-Brexit. 

 Meanwhile, British consumer morale suffered its steepest drop in over 26 years in the wake of the Brexit vote, data from GfK showed overnight. 

 Spain's economy expanded at a slightly slower pace in the second quarter, though a seven-month delay to form a new government has yet to markedly derail a recovery and officials are optimistic about full-year growth.

Playing down concerns over the fallout from two inconclusive elections, Spain's caretaker conservative government is poised to hike forecasts for 2016 output as soon as Friday even as talks to form a coalition are yet to yield a major breakthrough.

Acting Economy Minister Luis de Guindos signalled earlier this week that output was set to expand 2.9pc in 2016, up from a previous forecast of 2.7pc.

Robust consumer spending, buoyed by a turnaround in one of Europe's most dysfunctional job markets and a record influx of tourists, has fuelled Spain's recovery from a deep recession over the past three years.

That appeared to have extended into the second quarter, though the National Statistics' Institute (INE) gave no details in a preliminary growth reading on Friday.

It said Spanish economic output grew 0.7pc between April and June from the first quarter, in line with forecasts and below the 0.8pc  growth recorded between January and March.

Reports from Reuters

French economic growth stalled unexpectedly in the second quarter on weak consumer spending and investment in a blow to President Francois Hollande's claims the economy is getting stronger, official data showed on Friday.

The result fell short of economists expectations for growth of 0.2pc from the previous quarter, and was even worse than the lowest estimate in a Reuters poll of 34 analysts for 0.1pc.

It also marks a sharp slowdown from the first quarter when the economy grew 0.7pc, the strongest rate in nearly three years. The INSEE statistics office revised that figure up from a preliminary estimate of 0.6pc.

Finance Minister Michel Sapin said the "disappointing" figures" reflected exceptional factors like strikes at refineries in addition to the slowdown from the particularly strong first quarter.

He said the government was nonetheless sticking with its 2016 growth forecast of 1.5pc.

Report from Reuters

Eurozone second quarter GDP figures are due for release this morning followed by a US reading later today at 1.30pm. 

Previewing the release, Connor Campbell, of SpreadEx, said: 

"If analysts’ estimates are anything to go by the region’s indices are right to be jittery; the Eurozone is expected to have only grown by 0.3pc in Q2, half of what it managed in Q1.

"Already the Eurozone’s individual components have disappointed – Spain saw its growth drop by 0.1pc quarter-on-quarter to come in at 0.7pc, while France managed a disastrous 0.0pc against the (upwards revised) 0.6pc in Q1. The Eurozone-awfulness didn’t end there; France saw its consumer spending remain at -0.8%, with inflation equally terrible at -0.4%, while the Spanish CPI also arrived worse than expected at -0.6%. That is going to put real pressure on the region-wide inflation figure, which may well fail to match the forecast 0.1pc."

More reaction to the Bank of Japan's modest dose of stimulus: 

Lukman Otunuga, Forex Time: 

"Investors were left empty handed during trading on Friday following the Bank of Japan’s expansion of monetary stimulus which fell below market expectations.

This decision was shocking as the nation continues to be exposed to downside risks while domestic economic data such as GDP and inflation have displayed signs of weakness.

With risk aversion from the global instability encouraging investors to purchase the safe-haven Yen, Japan could be in store for further punishment moving forward.

While markets reacted accordingly to the BoJ decision, the disappointment should be no surprise as the persistent uncertainty in the financial markets has created an era of central bank caution."

James Mee and Jeff Keen Waverton Investment Management: 

"The BoJ will now consider the effectiveness of its monetary policy stimulus at its next meeting in September while the Japanese Government goes ahead with planning its new ¥28 trillion fiscal stimulus which is worth around 5pc of GDP.  With the BoJ the only buyer of JGBs in town, other holders may need to reconsider their positions also.

"The move represents a subtle shift of focus from monetary to fiscal policy, as policy-makers attempt to snap the Japanese economy out of deflation and low growth."

Reckitt Benckiser, the consumer goods giant behind brands such as Dettol, Nurofen and Vanish, would have reported a strong half-year result, had it not been for the £300m it had to set aside to cover liabilities related to a humidifier scandal in South Korea.

Reckitt bought a company called Oxy Co in South Korea in 2001, which sold a disinfectant product for humidifiers, called Humidifier Guard. In 2011, it transpired that some of these disinfectants may have been the cause of lung and respiratory injuries and even deaths in South Korean consumers.

At the time, Oxy RB had the largest share of the market for humidifier sanitiser products. Following the announcement, Oxy RB began to withdraw the product form the market.

The £300m charge is Reckitt’s best estimate of the quantifiable costs associated with the issue, including compensation to potential victims.

Accordingly, operating profit for the year to June 30 slumped 19pc to £762m. Had it not been for the scandal, profits would have risen 13pc to £1.08bn.

Oxy aside, Reckitt Benckiser enjoyed a strong first-half, with like-for-like sales growth of 5pc, led by its health and hygiene products. New products that were recently launched onto the market also performed well, including Dettol Gold and Durex Invisible condoms.

Rakesh Kapoor, chief executive, said:

“Our strategic focus on structurally attractive health and hygiene categories and exciting innovation pipeline positions us well for another year of growth and margin expansion, despite the uncertain macro environment and softening consumer demand.

“Our global footprint means we expect no tangible impact from uncertainty over Brexit.  We therefore reaffirm our full year like-for-like net revenue target which, given the impact of the HS issue, is at the lower end of the 4pc to 5pc.”

Report from Julia Bradshaw

British Airways-owner IAG said airline strikes, terrorism and sterling’s post-Brexit plunge has hit profits at the airline company, despite lower fuel costs.

The airline group posted a 4.1pc lift in sales to €10.8bn for the six months to June 30 and pre-tax profits of £609m before exceptional items, a 48pc increase on last year, or £79m including exceptional costs.

The company said there had been no “immediate regulatory” impact of the vote to leave the EU but that it had booked a negative currency impact of €148m over the six-month period.

Willie Walsh, IAG’s chief executive, said: “Numerous external factors affected our airlines including the impact of terrorism, uncertainty around the UK’s EU referendum and Spain’s political situation.”

Report from Kate Palmer (Read more here)

And finally, on the much loved topic of helicopter money, Bank of Japan governor Haruhiko Kuroda said: 

"Advanced economies, including Japan, do not conduct monetary and fiscal policies as a set. Such an idea, which includes direct debt underwriting by central banks, is prohibited by law.

But when fiscal stimulus is expanded at a time the central bank is maintaining ultra-loose monetary policy to achieve its price target, it enhances the boost to the economy."

"Such a policy mix ... isn't the central bank helping fund government spending. It's different from helicopter money."

When asked about pressure from the government, here's what Kuroda said: 

"I haven't felt any pressure (from the government). But as written in the BOJ law, monetary policy is part of broader economic policymaking ... Just because we rule out incrementalism, that doesn't mean we will deploy all of our steps every time we ease.

"At times we may use all three dimensions of easing and other times we may not do so. What's important is to take sufficient and necessary steps at the time."

Monetising government debt

"We have absolutely no plan to monetise government debt. We're taking sufficient and necessary steps solely for the purpose of achieving our price target."

Here's what Kuroda had to say on Bank  of Japan government bond purchases: 

"The BOJ holds one-third of JGBs in the market but that means we still have two-thirds left to buy. I absolutely don't think we are reaching the limits of JGB buying."

"I don't think we've reached the limits both in terms of rate cuts and JGB buying."

Comprehensive policy review at next rate meeting

"We've decided to conduct a comprehensive assessment of our policy with half a year having passed (since the adoption of negative interest rates). This is what all the board members thought would be desirable ... Whether that will affect monetary policy decisions will depend on what the outcome of the assessment will be. The purpose of this assessment is to examine what's necessary to achieve our 2 percent price target.

"We adopted QQE three years and three months ago and expanded it in 2014 ... But it's true we have not been able to achieve 2 percent inflation yet. We will of course consider what to do in terms of monetary policy steps, based on the outcome of our comprehensive assessment."

"The effect of our monetary easing steps has been felt quite broadly on the economy, but not necessarily as much on prices. That's why we need to conduct this comprehensive assessment.

"Our comprehensive assessment will include scrutinising how the flattening of the yield curve affects financial institutions' profits."

"When we say the 'drip-feed' approach of policy action is inappropriate, we're talking about the importance of taking necessary and sufficient steps at the time. It's undesirable to hold off on taking necessary, sufficient steps and being forced into responding to deterioration (in the economy) later."

Asked whether the BOJ was pre-announcing monetary easing at its next meeting by announcing its plan to conduct a comprehensive assessment: "We're not announcing this based on an assumption that we will do something on monetary policy. I am aware some central banks do pre-announce monetary easing. We don't do such a thing."

The Bank of Japan expanded stimulus today by doubling purchases of exchange-traded funds (ETF), yielding to pressure from the government for action, but disappointing investors who had set their hearts on more audacious measures. 

Here's what BOJ Governor Haruhiko Kuroda said at his post-meeting news conference:

Japan's economic health

"Japan's economy may see the pace of recovery slow for a while due to some weakness in exports and output. But it is then expected to continue expanding above its potential growth rate and expand moderately as a trend, with rising income driving spending among companies and households."

Negative interest rates

"Negative interest rates are being accepted by markets and functioning properly. The effect of the rate cut (in January) is very large, and is already being felt in markets and the real economy. As seen in the experience in Europe, there is more room to cut rates deeper into negative territory."

Joel Kruger, LMAX Exchange:

"Risk markets have made a living relying on an unwavering commitment from central banks to use everything they've got to artificially support the global economy. One can only wonder if today’s BOJ decision sends a message that this narcotic of policy stimulus may no longer be so readily available." 

Jasper Lawler, CMC Markets: 

"It was a missed opportunity for the BOJ to have done more at its first meeting after Prime Minister Abe was re-elected with a new mandate to expand Abenomics.

"Even the Japanese stock market, which is the single biggest beneficiary of the policy change saw shares drop, with the Nikkei choppy before falling nearly 1%. The shift into the yen, typically perceived as a haven asset will have repercussions on demand for risky assets including European stocks.

"The impact of Japan’s weak monetary stimulus is being interpreted differently across Europe. The resulting dip in the euro and a perception that Mario Draghi could eventually follow Kuroda down the road of ETF purchasesis supporting French and German stocks ahead of the open. UK stocks look set to open slightly lower on Friday since a smaller-than-expected easing from the Bank of Japan could take the pressure off the Bank of England to cut interest rates next week."

Simon French, Panmure Gordon: 

"Softer Asian equity markets followed the announcement from the BoJ that deposit rates for commercial banks would remain unchanged in August, while monthly bond purchases were held at Y80tn. The pace of ETF purchases will be accelerated to Y6tn a year and there was a doubling in dollar lending. This as core inflation in Japan fell further to read -0.5pc in June."

European stock markets were mixed this morning after Bank of Japan failed to impress bourses with injecting only a modest dose of stimulus to the economy to offset Brexit effects. 

• FTSE 100: -0.21pc
• DAX: +0.29pc
• CAC 40: +0.15pc
• IBEX: +0.85pc

 Mike van Dulken, of Accendo Markets, said: "A neutral open comes after a mixed Asian session with the Bank of Japan failing to deliver what greedy markets wanted - more stimulus.

"We did ask whether it would do little or even hold off until September, like the ECB, in order to see what the BoE does next week and allow the Japanese government to introduce the fiscal stimulus it has announced. Some say a limited offering suggests the BoJ has run out of options. But just because it didn’t move overnight, doesn’t mean it won’t move later. Patience please."

Barclays has posted a 20pc drop in pre-tax profits to £2.06bn in the first half of the year, as it continued to run down its non-core businesses and racked up £525m in legal fees.

Barclays is hiving off parts of its business which it deems non-core in a bid to turn around the struggling bank.

It started selling down its stake in Barlcays Africa in May and is also axing the French retail and wealth management business. The non-core divisions made negative income of £586m in the first half, while losses more than doubled to £1.90bn. Barclays also booked a number of impairment charges in the half year.

By contrast, Barclays UK enjoyed a 52pc rise in pre-tax profit to £1.08bn, while the corporate and international division enjoyed a 16pc increased in profit.

The bank is on a major cost-cutting drive, implemented by chief executive Jes Staley. He said Barclays was on track to meet its target of £12.8bn  in costs in its core business for 2016, while the non-core business would incur costs of £400m to £500m in 2017, significantly below previous guidance.

Mr Staley said:

"This has been a quarter of very encouraging progress against our strategy. Our core businesses, Barclays UK and Barclays corporate and international, continue to thrive.

“Non-core rundown - the key to unlocking the full earnings power of that core - has good momentum, and we remain committed to closing the unit in 2017.”

“Our priorities remain: strengthening our core businesses; closing Barclays non-core as fast as possible; progressing the sell down of our stake in Barclays Africa to a point where we can deconsolidate it; eliminating costs in both core and non-core; dealing with legacy issues; and steadily strengthening our capital position.

Taken together, the picture in the second quarter is one of strong and accelerating progress against our strategy. We remain confident that it is the right plan for Barclays, and see no reason to adjust it, or the pace of delivery, in light of the vote by the UK last month to exit the EU.

“Given the inherent diversification of our business model, coupled with a longstanding conservative approach to risk, Barclays is well positioned to weather any potential economic consequences of that decision. We are very much open for business, and fully committed to supporting our customers and clients, and the real economy, through this period of uncertainty."

British Airways-owner IAG said airline strikes, terrorism and sterling’s post-Brexit plunge had hit profits at the airline company, despite lower fuel costs.

The airline group posted a 4.1pc lift in sales to €10.8bn for the six months to June 30 and pre-tax profits of £609m before exceptional items, a 48pc increase on last year, or £79m including exceptional costs.

The company said there had been no “immediate regulatory” impact of the vote to leave the EU but that it had booked a negative currency impact of €148m over the six-month period.

Willie Walsh, IAG’s chief executive, said: “Numerous external factors affected our airlines including the impact of terrorism, uncertainty around the UK’s EU referendum and Spain’s political situation.”

Bad news for London's, ahem, least popular estate agent.

Profits at Foxtons tumbled 42pc in the first half of the year as the impact of Britain's decision to quit the European Union hit the London property market.

The estate agent said pre-tax profits slumped from £18.1m to £10.5m during the period.

Chief executive Nic Budden said: "Uncertainty surrounding the EU referendum led to slow residential property markets in London during the first half of the year.

"Q2 experienced a sharp contraction and we believe that the overall level of property sales transactions made in London during the first half of the year is substantially down on last year.

"The result of the referendum to leave Europe is likely to lead to a prolonged period of further uncertainty and we do not expect London residential property sales markets to show signs of recovery before the end of the year."

Foxtons also said it is reviewing the pace of new branch openings in the short term in response to market conditions.

Revenue also dipped 3pc to £68.6m.

Swiss banking giant UBS on Friday beat earnings expectations in the second quarter, despite a 14pc slide in net profits as economic uncertainty hit its activities.

Switzerland's largest bank posted net profits of 1.03 billion Swiss francs (£796m), beating the expectations of analysts polled by the Swiss AWP agency who had expected the lender to post a figure of around 730 million francs.

Net banking income fell 5pc to 7.4 billion francs, also ahead of analyst forecasts which had centred on 7.0 billion.

"We achieved this strong result by helping our clients navigate continued difficult market conditions, while staying disciplined on risk and further reducing cost. UBS remains in a solid position with strong capital, strategic clarity and a well-diversified business model," chief executive Sergio P Ermotti said in a statement.

Competition regulators have given the green light to Lloyds Pharmacy owner Celesio to acquirer 277 pharmacies owned by Sainsbury’s, provided it sells 12 of its existing stores before the takeover.

Celesio operates 1,540 pharmacies and intends to acquire 277 Sainsbury’s pharmacies, which are usually located inside the supermarkets.

The Competition and Markets Authority has set out 12 areas in England and Wales where the two companies’ pharmacies compete so closely with each other that the merger might lead to less competition.

Simon Polito, chairman of the CMA inquiry, said: “Although the price of prescription medicines is fixed and some features of quality, range and service are specified by regulation, pharmacies still compete on various aspects of their offer which are important to customers.

“In those areas where a Sainsbury's pharmacy is currently a strong competitor, under common ownership Lloyds might be able to reduce service quality to increase profits without being concerned about losing customers to a rival.

"By selling the Lloyds pharmacy in those areas to a new owner with the relevant expertise and the incentive to attract customers through its service quality, we can ensure that customers do not lose out from this deal."    

In the end, some highly anticipated action from the Bank of Japan was a bit of a let-down.

The BOJ expanded stimulus on Friday by doubling purchases of exchange-traded funds (ETF), yielding to pressure from the government and financial markets for bolder action, but disappointing investors who had set their hearts on more audacious measures.

The central bank maintained its base money target at 80 trillion yen ($775bn) as well as the pace of purchases for other assets including Japanese government bonds.

The dollar fell more than a full yen on Friday at one point to as low as 102.825 and the Nikkei average tumbled nearly 2pc, after the BOJ's decision fell short of expectations.

"The BOJ did not live up to expectations. I want to hear what BOJ Governor Haruhiko Kuroda has to say, but increasing ETF purchases makes no contribution to achieving 2pc inflation," said Norio Miyagawa, senior economist at Mizuho Securities.

"The BOJ won't admit it, but it has reached the limits of quantitative easing and negative rates.

Good morning and welcome to our rolling coverage of the markets.

After yesterday's frenzy of business news, it's a calmer day - although big hitters such as Barclays and IAG are presenting results.

The British high street bank reported net profit of £803m in the last quarter​, versus £1.2bn a year ago.

British Airways-owner IAG posted a lower than expected quarterly operating profit and said it expected 2016 profit to rise by a "low double digit" percent after attacks, strikes and Britain's vote to leave the European Union impacted travel demand and hit result.

In Japan, the yen surged after the Bank of Japan made minor tweaks to its stimulus programme that disappointed dealers who had expected a big announcement to kickstart growth in the world's number three economy.

The central bank said it would boost its exposure to riskier investments, but left a massive 80 trillion yen ($772 billion) annual bond-buying programme unchanged.

Also on the agenda today: 

Interim results: UBM, Barclays, Pearson, Centaur Media, FBD Holdings, IAG, Indivior, IMI

AGM: China New Energy, StratMin Global Resources

Economics: net lending to individuals (UK), mortgage approvals (UK), advance GDP (US), Chicago PMI (US), Revised UoM inflation expectations (US), Revised UoM consumer sentiment (US), CPI flash estimate y/y (EU), Prelim flash GDP q/q (US), unemployment rate (EU)