FTSE 100 today: Index opens flat as U.K. GDP falls; Pound above $1.35; Tesco gains

U.K. GDP contracted 0.3% in April, reversing some of Q1's 0.7% growth, driven by rising energy costs and taxes, while the FTSE 100 saw minimal movement. In company news, Tesco reported a 5.5% rise in like-for-like sales, Halma exceeded profit expectations with a 16% increase in adjusted pretax profit, and Wood Group extended Sidara's takeover deadline to June 30; Crest Nicholson posted steady H1 results amid a decline in private sales.

Analysis

The U.K. economy experienced a notable setback in April, with Gross Domestic Product contracting by 0.3%, a more substantial decline than the anticipated 0.1% and partially offsetting the 0.7% expansion recorded in the first quarter. This contraction, attributed to rising energy costs and increased taxes, saw year-on-year GDP growth ease to 0.9% from 1.1% the previous month. Market reaction was subdued, with the FTSE 100 index nearly flat, gaining 0.01%, while GBP/USD fell 0.07% to above 1.35; this contrasts with steeper declines in continental European markets, where Germany's DAX dropped 0.8% and France's CAC 40 dipped 0.5%. Amidst this macroeconomic caution, individual company performances presented a mixed picture. Tesco PLC reported a robust 5.5% rise in group like-for-like sales for its first quarter, with total group sales reaching £16.38 billion. U.K. engineering firm Halma PLC exceeded expectations, posting a 16% increase in adjusted pretax profit to £459.4 million and an 11% rise in revenue to £2.25 billion for the fiscal year, signaling a strong start to fiscal 2026 with projected upper single-digit organic revenue growth. In contrast, Crest Nicholson Holdings plc, while describing its H1 results as encouraging due to strategic updates, reported a 6% decline in home completions to 739 units and a significant 40% drop in private sales. Separately, John Wood Group PLC has extended the deadline to June 30 for Sidara to make a firm takeover offer, prolonging uncertainty around the engineering consultancy's future.

Key Decisions for Investors

• Investors should closely monitor upcoming U.K. macroeconomic indicators, particularly inflation and consumer spending data, given the unexpected GDP contraction in April which signals potential further economic headwinds.
• Consider a selective approach to U.K. equities, favoring companies with strong fundamentals and demonstrated resilience in the current environment, such as Halma with its profit growth and positive outlook, while exercising caution towards sectors sensitive to economic slowdowns and rising costs, like the housing sector as suggested by Crest Nicholson's sales decline.
• The extended takeover deadline for John Wood Group by Sidara introduces event-driven considerations; investors in or considering Wood Group should monitor developments closely for potential impacts on valuation and strategic direction.
• Given the flat performance of the FTSE 100 amidst negative domestic economic news and broader European market weakness, maintaining a diversified portfolio and potentially hedging against sterling weakness could be prudent until a clearer economic outlook emerges.