US stocks slumped as tensions in Ukraine flared and better-than-expected US reports on economic growth and weekly jobless claims fuelled speculation of an interest rate hike.

The second estimate for US gross domestic product (GDP) showed that the American economy grew by an annualised rate of 4.2% in the second quarter.

It was higher than the initial estimate of 4% growth in the advance report and surprised analysts who had expected a small downwards revision to 3.9%.
It also marked a strong-than-expected rebound from the 2.1% contraction registered in the first three months of the year.

According to the Commerce Department, Thursday's revision showed that the increase in business investment was larger than previously thought.

"These figures confirm the strength of the US economy, and judging by recent figures, it is not going to run out of momentum any time soon," said Nancy Curtin, the chief investment officer at Close Brothers Asset Management.

"While sluggish wage growth remains a key consideration for the Fed, the employment figures continue to show the strength of the labour market. [...] The prospect of a change in monetary tightening is one cloud on the horizon, but it should not be a cause for undue concern."

In other economic data on Thursday, US initial jobless claims fell by 1,000 to 298,000 in the week to 23 August, under the 300,000 consensus forecast. The previous week's level was revised up by 1,000 to 299,000.

Meanwhile, the four-week moving average fell by 1,250 to 299,750.

Alpari UK analyst Craig Erlam said the US economy is looking strong with only thing standing in front of the first rate hike from the Federal Reserve being a delay in productivity and wage improvements.

"The country should be on for more than 2% growth this year which is far from great, but good enough under the circumstances."

Meanwhile, Ukraine President Petro Poroshenko has called an emergency security meeting after pro-Russian insurgents widened their attacks, taking several towns outside their strongholds of Donetsk and Luhansk, including near the Sea of Azov.

In company news, Williams-Sonoma declined after its third-quarter earnings forecast missed analysts' estimates.

Abercrombie & Fitch Co. dropped as second-quarter sales fell more than analysts had projected.

Guess? slumped after the retailer cut its annual earnings forecast.

RD

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