On Friday afternoon, London stock prices experienced a sharp decline following the revelation that the UK economy exhibited no growth in the third quarter. Despite this, the performance surpassed expectations of a contraction.
The FTSE 100 index saw a significant drop of 102.37 points, or 1.4%, settling at 7,353.30. The FTSE 250, considered the “domestic barometer” in the UK, recorded a 1.6% decrease at 17,752.38, while the AIM All-Share was 0.6% lower at 700.37.
In the Cboe indices, the Cboe UK 100, Cboe UK 250, and Cboe Small Companies were 1.4%, 1.7%, and marginally lower, respectively. Meanwhile, European equities also suffered, with the CAC 40 in Paris down by 1.1% and the DAX 40 in Frankfurt lower by 0.8%.
Although the UK’s third-quarter economic performance averted a contraction, it failed to demonstrate any progress, according to the Office for National Statistics. The US estimated zero quarterly growth, exceeding the market consensus of a 0.1% contraction. The services sector production decreased by 0.1%, offsetting a 0.1% increase in construction production, while manufacturing remained steady.
Interactive investor analyst Victoria Scholar noted,
“This was still the worst quarterly performance of the UK economy in a year.” The slow macroeconomic outlook, coupled with high inflation and rising interest rates, raises concerns about a potential recession in the coming year.
The UK’s total deficit on goods and services trade decreased to GBP 6.0 billion in the third quarter, compared to GBP 13.1 billion in the second quarter. Cargo balance deficit dropped by GBP 7.0 billion, and the services sector surplus increased by GBP 100 million.
London investors were influenced by the hawkish stance of the US Federal Reserve chief, Jerome Powell, who indicated a willingness to raise interest rates further to control inflation.
In the FTSE 100, Diageo experienced a significant drop of 14%, citing weak performance prospects in Latin America and the Caribbean markets. Oil companies Shell and BP were among the few winners, with increases of 1.3% and 1.0%, respectively, following a rise in Brent oil prices.
In the FTSE 250, Redrow faced a 5.4% loss after warning about a “moderate” housing market and a 25% YoY decline in net private reservation value. Wizz Air fell by 5.2%, revising its operating profit expectations due to challenging operating conditions.
Among London’s small-caps, Galliford Try saw a 0.6% increase, expressing confidence in its annual outlook leading up to the annual general meeting. The construction company reported well-performing activities and trade in line with revised expectations, emphasizing a GBP 3.7 billion order book at the end of September.