London's stock market closed the trading week on a positive note, with the FTSE 100 index climbing 1.21% by the end of trading on Friday. This upward momentum was primarily driven by ongoing earnings reports throughout Europe. NatWest Group ($NWG) was the standout performer in this rally, seeing its shares increase by an impressive 7.04% at closing.
The British banking giant announced a significant agreement to acquire £2.5 billion worth of premium UK residential mortgages from Metro Bank ($MTRO), a retail and commercial bank, with an anticipated cash payment of up to £2.4 billion. This deal not only enhanced NatWest’s portfolio but also galvanized the stock of Metro Bank, which rose by 5.68% following the announcement of this earnings-enhancing transaction. In a separate report, NatWest also released figures indicating a decline in both its attributable profit and net interest income year-over-year for the first half of the financial year. UK equities benefitted from positive sentiment as they responded to encouraging economic indicators from the United States.
The US Department of Commerce's Bureau of Economic Analysis released advanced estimates showing that the real gross domestic product (GDP) surged by 2.8% year-over-year in the second quarter of 2023, a notable increase from 1.4% observed in the first quarter and better than the consensus estimate of 2%.
A more comprehensive report is expected on August 29, detailing the GDP performance for the three months ending June 30. In its analysis, the BEA noted, "Compared to the first quarter, the acceleration in real GDP in the second quarter primarily reflected an upturn in private inventory investment and an acceleration in consumer spending.
These movements were partly offset by a downturn in residential fixed investment." This indication of economic resilience is likely to encourage further investment and confidence in the market. Looking forward, market analysts are keenly awaiting the upcoming meeting of the Bank of England on August 1, where a monetary policy decision is expected to be made.
The consensus among financial experts is leaning towards the Bank of England implementing a 0.25% reduction in interest rates, which could further influence the dynamics of the UK economy and its stock market performance..