LONDON (Reuters) - Britain’s blue chip index was knocked out to a three-weeks low on Wednesday when better than expected economic growth triggered a surge in the pound and as shares in heavy-weight GlaxoSmithKline suffered their worst fall in nearly a decade.
Strong quarterly gross domestic product data bolstered expectations the Bank of England would raise interest rates next week, hitting blue chips, many of which source their revenues overseas.
“Ultimately, a respectable growth rate in the UK economy will assist the equity benchmark in the long run, but for now the pound is putting pressure on it”, wrote David Madden, a market analyst at CMC Markets said in a note to his clients.
A barrage of lacklustre earnings reports from U.S. companies also cooled the mood in late afternoon trading as Wall Street retreated from its recent record-highs.
GlaxoSmithKline (GSK.L) posted its worst performance in nine years, sinking 5.5 percent as the prospect of the group engaging in a consumer health business deal worth some $15 billion sparked investor fears of a dividend cut.
“Investors remain focused on the safety of the dividend,” said Leerink analyst Seamus Fernandez.
Antofagasta shares posted the second worst performance, falling 4.4 percent after its copper production forecast and third quarter results disappointed investors.
On the few stocks on the positive side, British American Tobacco (BATS.L) grew 0.4 percent after saying that it sees revenue from “next generation products”, such as e-cigarettes and vaping products, doubling to more than 1 billion pounds next year.
British bank Lloyds (LLOY.L) also made it to the green, up 0.8 percent after reporting third quarter earnings.
Reporting by Kit Rees, editing by Ed Osmond