Surprise UK GDP revision lifts FTSE above 5,400

UK GDP for the third quarter has been revised up by 0.1% to 0.6%, the Office for National Statistics (ONS) announced this morning.

The revision was unexpected and has boosted market sentiment, renewing hopes of a Santa rally.

The FTSE 100 was up 1.03% or 55 points to 5,445 at 10.50am.

Elsewhere in Europe the French Cac has gained 1.18% to 3,066 while the German Dax is up 1.04% to 5,852.

Meanwhile, the pound remained higher against the dollar following the announcement, up 0.2% to trade at $1.5612.

Gilts yields rose from hitting record lows in yesterday's session. Yields on the ten year benchmark gilt were 2.06%, up from 2.02%.

The ONS attributed the revision to stronger services and construction output growth.

However, it was not all positive news as the ONS dealt the UK economy a blow by stating it did not grow at all in the second quarter. The Q2 growth figure of 0.1% was revised down to 0%.

"The profile of GDP growth in recent quarters continues to point towards a rather fragile economic picture," said the ONS.

"During the nine quarters of the recovery, the economy has gained just over half of the output lost during the five quarters of contraction."

The Bank of England (BoE) yesterday warned the UK economy is unlikely to grow in Q4 and in the first quarter of next year, as the eurozone teeters on the brink of a a recession.

Charlie Bean, BoE deputy governor, said economic output will be pretty flat over the next six months.

Bean added a further bout of quantitative easing could be on the cards in February to stimulate economic growth.

He was tight-lipped on the amount of monetary stimulus required, but leading economists predict the BoE will inject a further £75bn on top of the £75bn added in October.

"The current programme will take us through until late January and early February," said Bean.

"If we feel that it is necessary to inject further stimulus into the economy to keep spending growing and prevent inflation falling too low, then we will certainly be willing to do more."