Signs of rebounding economic growth sends FTSE 100 to three-week highs

FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville

(Reuters) - London’s FTSE 100 closed at three-week highs on Wednesday as investors cheered monthly data that showed a restart in economic growth, while upbeat earnings from motor insurer Admiral sent its shares soaring to an all-time peak.

Gross domestic product collapsed in the second quarter, shrinking 20.4%, but the blue-chip index .FTSE outperformed regional peers with its 2% gain as data showed growth restarted in May and quickened by a record single-month increase in June, slightly beating forecasts.

“UK is one of the cheaper markets out there and it’s one of the markets that investors expect to outperform if data continues to improve in the next few months,” said Andrea Cicione, head of strategy at TS Lombard.

The lower valuation will also help UK markets benefit from a rotation to value from growth - the first signs of which are being seen through a rally in technology stocks in the United States, Cicione added.

Financials, health care and consumer staples led gains, while a surge in crude prices lifted oil stocks, helping the FTSE 100 extended gains to a fourth straight session. [O/R]

The mid-cap FTSE 250 .FTMC closed up 0.5%, notching fresh two-months highs.

A raft of stimulus has helped the benchmark UK stock indexes bounce from their March lows, but they are still well off their pre-pandemic highs amid surging unemployment and forecasts of a slower-than-expected economic rebound.

In earnings-driven moves, Admiral Group ADML.L jumped 7.2% to top the FTSE 100 after lower motor insurance claims during Britain's coronavirus lockdown helped it record a 31% jump in first-half profit and reinstate a special dividend.

Meanwhile, cybersecurity firm Avast AVST.L slumped 3% despite raising its full-year revenue forecast. The pandemic impacted parts of the business, including reduced demand from mobile operators for its security software, the company said.

Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Subhranshu Sahu and Bernadette Baum