European stock markets pushed higher on Friday as new data showed that the UK’s economy grew in the second quarter of this year.
In London, the FTSE 100 (^FTSE) gained 0.7% after opening, heading back towards 7,000 points after a sharp rout this week. Meanwhile the CAC (^FCHI) rose 0.7% in Paris, and the Frankfurt DAX (^GDAXI) was 0.9% higher.
According to the Office for National Statistics (ONS), gross domestic product (GDP) in the UK increased by 0.2% from April to June, an improvement on the previously forecast decline of 0.1%.
But it added that the economy’s overall size is smaller than previously estimated, 0.2% below its pre-pandemic level.
The British economy is also estimated to have shrunk by 11% during the first year of the pandemic, rather than 9.3% as previously thought.
“The good news is that the economy is not already in recession. The bad news is that contrary to previous thinking, it still hasn’t returned to pre-pandemic levels. It’s the only G7 economy in that situation and it makes the chancellor’s fiscal plans look even more untenable,” Paul Dales, chief UK economist at Capital Economics, said.
“So despite the better news on the performance of the economy in Q2, the overall picture is that the economy is in worse shape than we previously thought. And that’s before the full drag from the surge in inflation and leap in borrowing costs have been felt.”
Prime minister Liz Truss and chancellor Kwasi Kwarteng are set to meet the chairman of the Office for Budget Responsibility (OBR) to discuss the fallout since last Friday’s mini-budget.
Read more: UK business confidence stabilises after three month decline
Across the pond on Wall Street, S&P 500 futures (ES=F) were up 0.7%, Dow futures (YM=F) advanced 0.5%, and Nasdaq futures (NQ=F) were 0.9% higher as trade began in Europe.
It came despite jitters in currency and bond markets, which persisted over hawkish talk from central banks, worries about global recession, and rising geopolitical risk.
However, each of the major indices are ending the quarter on a sour note. In the year to date, the Dow Jones is down by 20%, the S&P 500 24% and the Nasdaq 31%.
Richard Hunter, head of markets at Interactive Investor, said: “With volatility and turmoil sweeping across markets due to fears of inflation, recession, currency volatility and escalating geopolitical tensions, there are few signs that the last quarter of the year will be any less challenging for investors.
“The imminent third quarter reporting season will likely show some unpleasant surprises, and individual stocks are likely to be punished for any earnings misses, let alone muted outlook comments.”
Read more: How four days of market chaos has impacted UK household finances
Elsewhere, stocks in Asia suffered their worst month since the onset of the COVID-19 pandemic, recording a near 13% drop during September.
It was the largest decline since March 2020 when COVID threw financial markets into chaos.
In Tokyo, the Nikkei (^N225) fell 1.8% on the day, while the Shanghai Composite (000001.SS) dipped 0.6%. The Hang Seng (^HSI) rose 0.7% in Hong Kong, managing to eke out gains.
Watch: How does inflation affect interest rates?
,,,
