Feeling the recession squeeze. ©AFP Niklas HALLE’N

London (AFP) – The British pound dropped on Wednesday as Britain’s coronavirus-ravaged economy slid into its deepest recession on record.

The weakening currency helped the London stock market outperform its peers as investors bought into UK-based multinational companies earning much of their income in dollars.

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 lockdown.

“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, calling the June figures “encouraging”.

– US-China focus –

Eurozone stock markets built on Tuesday’s strong gains, with lingering optimism about an economic recovery and optimism about upcoming US-China trade talks outweighing worries that US lawmakers may not, after all, agree to a fresh stimulus deal any time soon.

US and Chinese officials are meeting this weekend to review their trade pact.

Tensions between the powers has had investors worried, but 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.

In New York, the Dow added nearly 300 points in the first moments of trading.

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 1330 GMT –

London – FTSE 100: UP 1.5 percent at 6,244.97 points

Frankfurt – DAX 30: UP 0.4 percent at 12,996.99

Paris – CAC 40: UP 0.7 percent at 5,065.16

EURO STOXX 50: UP 0.6 percent at 3,352.25

New York – Dow: UP 1.0 percent at 27,967.34

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)

Pound/dollar: DOWN at $1.3043 from $1.3047 at 2045 GMT

Euro/pound: UP at 90.47 pence from 89.94 pence

Euro/dollar: UP at $1.1796 from $1.1734

Dollar/yen: UP at 106.76 yen from 106.50 yen

West Texas Intermediate: UP 2.1 percent at $42.49 per barrel

Brent North Sea crude: UP 1.9 percent at $45.33

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Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.