The FTSE 100 and European stocks were lower as markets do not seem to have been impressed with the flat growth of the UK economy in the final three months of last year
The FTSE 100 (^FTSE) slipped 0.37% to 7,881 points at the open, while the CAC 40 (^FCHI) in Paris lost 0.32% to 7,165 points. In Germany, the DAX (^GDAXI) fell 0.62% to 15,419.
The latest figures from the Office for National Statistics showed the UK economy stalled in the fourth quarter with no growth in GDP between October and December although this meant it narrowly avoided going into recession.
The UK has dodged the technical definition of a recession by “a hair’s breadth”, said Laura Suter, head of personal finance at AJ Bell.
“The government will pounce on these figures as an example of why the IMF and other economists’ predictions of UK economic doom are too downbeat, no doubt latching onto the fact that we’re not in a technical recession. And, perhaps more worryingly for the UK public, the Bank of England may well see this as a sign that they can go higher and harder with rate rises at their next meeting,” she said.
“Why does a recession matter to the UK public? Recessions brings slower growth from many companies, meaning fewer pay rises and the potential for job losses as businesses struggle. While the jobs market is still pretty tight, many of those effects could still be felt despite dodging a technical recession,” she added.
Read more: UK narrowly avoids recession despite December drop
Victoria Scholar, head of investment at Interactive Investor, warned that lingering inflation continues to weigh on UK households.
“December’s growth was negatively impacted by industrial action across the UK with postal strikes, a hit to public services and lower school attendance. On top of that the Premier League football’s pause for the FIFA World Cup also had a negative impact on UK GDP. Lingering double-digit inflation also continues to weigh on consumer confidence, spending and business margins,” she said.
“The Bank of England has recently rolled back its highly pessimistic forecasts from last year for the UK economy to face the longest recession since records began. Instead in the final quarter of 2022, it was projecting growth of 0.1%, which the official data just fell short of this morning.
“Although the UK managed to technically stave off a recession, the growth picture remains bleak weighed down by industrial action and sky-high inflation which is driving the cost-of-living crisis for consumers and a cost of doing business crisis too. The UK central bank is in the unenviable position of trying to raise interest rates to the extent that price pressures cool without inadvertently tipping the economy into a recession,” she added.
Also, First Abu Dhabi Bank (FAB) has told investors that it is not considering a takeover offer for banking giant Standard Chartered (STAN.L).
It said in a statement: “First Abu Dhabi Bank notes the recent press speculation in relation to Standard Chartered and reiterates that it is not evaluating a possible offer for Standard Chartered.”
It comes after fresh reports emerged on Thursday that the United Arab Emirates’ biggest bank could be again considering a takeover bid worth up to £28.9bn for the London-listed global bank.
The speculation had sent shares in Standard Chartered up by around a tenth. This Friday, the bank is leading the losses in the index.
FAB added that it reserves the right to make an offer in the future.
Sports and fashion retailer JD Sports (JD.L) fell 1.07% after Adidas flagged that it expects a high single-digit decline in sales this year.
Meanwhile, Brent crude (BZ=F) slipped and was trading at around $84/barrel, with traders continuing to hop between fears of a recession hitting the United States and hopes for strong fuel demand recovery in China.
In Asia, Tokyo’s Nikkei 225 (^N225) closed higher, climbing 0.31% to 27,670 points, while the Hang Seng (^HSI) in Hong Kong fell 2.03% to 21,185. The Shanghai Composite (000001.SS) also finished lower, losing 0.30% to 3,260 points.
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Across the pond, stocks finished lower on Thursday as Wall Street remains concerned over the outlook for interest rates amid the prospect of further policy tightening from the US Fed as part of its commitment to reign in stubborn inflation.
The Dow Jones (^DJI) slipped 0.73% to close at 33,375 points. The S&P 500 (^GSPC) dropped 0.88% to finish at 4,081 points and the tech-heavy NASDAQ (^IXIC) lost 1.02% to 11,789.
Recent hawkish comments by some Fed officials are also weighing on the markets.
S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all in the red as trade began in Europe.
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