London close: Stocks manage gains despite UK recession news

London markets had a mixed but ultimately positive day of trading on Thursday, despite news that the UK fell into a technical recession at the end of 2023.

The FTSE 100 index closed up by 0.38% at 7,597.53 points, while the FTSE 250 saw gains of 0.5% to 19,099.62 points.

In currency markets, sterling was last up 0.14% on the dollar to trade at $1.2583, while it saw a slight decline of 0.17% against the euro, changing hands at €1.1693.

“Global stocks remain resilient despite the news that both Japan and the UK fell into recession in the fourth quarter of last year,” said IG chief market analyst Chris Beauchamp.

“Today’s data has driven fresh hopes that rate cuts may be forthcoming in the UK, and with Germany also teetering on the brink of a recession, that the eurozone may see rate cuts sooner than anticipated.”

Beauchamp added that Tuesday’s US consumer price index data seemed to be the spark that would ignite a reasonable period of weakness in equities, but quipped markets were rarely obliging.

“While tech names are weaker today, there seems little news driving the move, and gains for the Dow and S&P 500 suggest it is more a period of rotation in global indices.”

UK slips into recession, EC downgrades eurozone growth forecasts

In economic news, fresh official data revealed that the UK slipped into recession by the end of 2023, marked by a larger-than-anticipated contraction in GDP during the fourth quarter.

The Office for National Statistics reported a 0.3% decline in GDP over the three-month period, following a 0.1% decrease in the previous quarter.

That downturn, meeting the definition of a recession with two consecutive quarters of negative growth, was more severe than analysts' expectations, who had anticipated a smaller contraction of 0.1%.

Despite that, the ONS noted a marginal 0.1% year-on-year increase in GDP for the entirety of 2023.

Within the fourth quarter, all three major sectors experienced declines, with construction output down by 1.3%, production by 1%, and services by 0.2%.

Monthly data also indicated a 0.1% decrease in GDP for December.

“Constrained budgets kept us from hitting the high street in December, with retail sales figures down to a level not seen since the lockdowns of January 2021,” said Danni Hewson, head of financial analysis at AJ Bell.

“A series of storms also took their toll.

“That said, recession is merely nibbling at the edges of the economy and there are already signs that this slump will go down in the record books as the shortest, shallowest recession to date.”

In Brussels, the European Commission revised down growth forecasts for the eurozone due to continued pressure from higher interest rates.

The winter economic forecast projected a weaker-than-expected start to 2024 for the European Union's economy, leading to adjustments in growth forecasts to 0.5% for 2023 and 0.8% for 2024, down from previous estimates of 0.6% and 1.2%, respectively.

The wider EU bloc also saw reductions in growth forecasts for 2023 and 2024.

However, inflation expectations were revised downwards, attributed largely to easing energy prices, with forecasts indicating a decline from 6.3% in 2023 to 3% in 2024.

“This forecast is surrounded by uncertainty, amid protracted geopolitical tensions and the risk of a further broadening of the conflict in the Middle East,” the EC said.

“The increase in shipping costs in the wake of the Red Sea disruptions is expected to have only a marginal impact on inflation.

“Further disruptions could, however, result in renewed supply bottlenecks that could choke production and push up prices.”

Across the pond, United States retail sales unexpectedly contracted at the beginning of 2024, according to data released by the Department of Commerce.

Seasonally adjusted figures showed a 0.8% month-on-month decline in January, amounting to $695.78 billion in sales.

That decrease followed a downward revision of the prior month's gain to 0.4%.

Weakness was particularly notable in sales of building materials and garden equipment, which saw a 4.1% decrease, as well as a 1.7% drop in sales at motor vehicles and parts dealers.

Non-store retailers also experienced a decline of 0.8% in sales.

Airlines on the rise, Genus and Close Brothers tumble

On London’s equity markets, airlines IAG, Wizz Air Holdings and easyJet saw gains ranging from 1.1% to 1.98%.

The increases followed Jet2 lifting its annual profit guidance, providing a boost to the sector as a whole.

Kingfisher stood out as a significant gainer, climbing 3.02% after the B&Q and Castorama owner received a 'buy' rating upgrade from Citi, citing optimism regarding the UK housing market's recovery.

Centrica also rallied, despite reporting a fall in annual profits, with adjusted operating profit declining due to lower commodity prices.

The company's full-year dividend increase of 33% contributed to investor confidence.

Independent North Sea oil and gas explorer Ithaca Energy saw a notable increase of 5.26% after announcing that its full-year earnings would align with guidance.

Bank of Georgia Group also gained ground, confirming advanced talks regarding a potential acquisition of Armenian bank Ameriabank.

On the downside, BP, Imperial Brands and Shell slipped as they traded without entitlement to the dividend.

Business information firm Relx reversed earlier gains to close lower, despite announcing a dividend hike following a robust full-year performance.

Animal genetics firm Genus tumbled 16.2% after warning on full-year profits, and Close Brothers Group saw a sharp decline of 22.51% after suspending its dividend for the year and signalling a review of future payouts pending the Financial Conduct Authority’s motor finance review.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,597.53 0.38%
FTSE 250 (MCX) 19,099.62 0.50%
techMARK (TASX) 4,385.61 0.11%

FTSE 100 - Risers

Croda International (CRDA) 5,024.00p 3.27%
Kingfisher (KGF) 225.10p 3.02%
Fresnillo (FRES) 479.30p 2.66%
NATWEST GROUP (NWG) 214.30p 2.54%
Rolls-Royce Holdings (RR.) 320.00p 2.50%
Coca-Cola HBC AG (CDI) (CCH) 2,440.00p 2.43%
Pearson (PSON) 969.00p 2.43%
SEGRO (SGRO) 833.20p 2.26%
Prudential (PRU) 807.60p 2.18%
CRH (CDI) (CRH) 6,006.00p 2.11%

FTSE 100 - Fallers

Imperial Brands (IMB) 1,830.50p -3.25%
Pershing Square Holdings Ltd NPV (PSH) 3,842.00p -1.69%
BP (BP.) 468.75p -1.63%
Marks & Spencer Group (MKS) 231.70p -1.36%
Shell (SHEL) 2,464.00p -1.34%
Airtel Africa (AAF) 99.50p -1.19%
RS Group (RS1) 770.60p -0.72%
Intertek Group (ITRK) 4,348.00p -0.71%
Relx plc (REL) 3,314.00p -0.66%
BAE Systems (BA.) 1,225.00p -0.41%

FTSE 250 - Risers

Ithaca Energy (ITH) 136.20p 5.26%
Bank of Georgia Group (BGEO) 4,030.00p 4.13%
Dr. Martens (DOCS) 93.25p 4.06%
Direct Line Insurance Group (DLG) 173.20p 3.99%
NCC Group (NCC) 126.60p 3.60%
IP Group (IPO) 51.90p 3.59%
Diversified Energy Company (DEC) 935.00p 3.37%
Moonpig Group (MOON) 161.90p 3.32%
HGCapital Trust (HGT) 423.00p 3.17%
Bridgepoint Group (Reg S) (BPT) 277.00p 3.13%

FTSE 250 - Fallers

Close Brothers Group (CBG) 308.40p -22.51%
Genus (GNS) 1,780.00p -16.20%
NextEnergy Solar Fund Limited Red (NESF) 73.60p -4.42%
Octopus Renewables Infrastructure Trust (ORIT) 72.60p -2.68%
Trustpilot Group (TRST) 187.40p -2.65%
Aston Martin Lagonda Global Holdings (AML) 171.60p -2.56%
NB Private Equity Partners Ltd. (NBPE) 1,538.00p -2.41%
Future (FUTR) 695.00p -2.39%
Domino's Pizza Group (DOM) 352.00p -2.28%
Just Group (JUST) 80.50p -2.19%