The FTSE 100 experienced a decline on Friday as the UK faced disappointing economic growth figures. The index closed down 54.1 points, or 0.6%, at 9,649.03, after reaching a high of 9,761.47 earlier in the day. This decline followed a broader trend, as the FTSE 250 finished higher by 24.45 points, at 21,876.55, while the AIM All-Share rose 3.70 points to close at 751.36.
Economic Performance in the UK
Recent reports from the Office for National Statistics indicated that the UK economy shrank by 0.1% in October, matching the contraction seen in September. This outcome contradicted market expectations for a 0.1% growth. The services sector saw a decline of 0.3%, and construction output fell by 0.6%. In contrast, production output increased by 1.1%.
Market Reactions to Economic Data
- FTSE 100: Closed at 9,649.03, down 0.6%
- FTSE 250: Ended at 21,876.55, up 0.1%
- AIM All-Share: Closed at 751.36, up 0.5%
Analysts expressed concern regarding the underlying issues contributing to the slowdown. Andrew Wishart from Berenberg highlighted that deteriorating fundamentals may hinder economic recovery. Conversely, Citi analyst Callum McLaren-Stewart noted the unexpected nature of the data, suggesting pre-budget uncertainty likely influenced consumer and business spending decisions.
Bank of England Interest Rate Expectations
The disappointing economic figures are expected to influence monetary policy decisions at the upcoming Bank of England Monetary Policy Committee meeting. Analysts speculate that a quarter-point interest rate cut is likely, given the weak GDP outlook. Matthew Ryan of Ebury indicated that dovish guidance could negatively affect the pound.
Currency and Global Market Impact
Following the economic report, the British pound fell against the US dollar, trading at 1.3356. The euro was down to 1.1739 against the dollar. Global markets, particularly technology stocks, also suffered declines, with significant drops in companies like Broadcom and Oracle.
Key Market Movements
- InterContinental Hotels Group: +2.3%
- Card Factory: -27%
- 1Spatial: +45% (proposed £87.1 million offer)
In commodities, Brent crude oil was priced at $61.30 per barrel, while gold rose to $4,291.08 an ounce.
Upcoming Economic Events
The coming week promises further economic data releases, including inflation figures in Canada and interest rate decisions from Europe, Japan, and the UK. Additionally, nonfarm payroll figures from the US, alongside UK and US inflation and retail sales data, are expected.
