London close: Stocks rise as UK economy unexpectedly grows

London stocks closed above the waterline on Friday after a better-than-expected UK GDP reading, as investors sifted through a number of key earnings from across the pond.

The FTSE 100 ended the session up 0.64% at 7,844.07, and the FTSE 250 was ahead 0.56% at 19,952.84.

Sterling was meanwhile in a mixed state, last weakening 0.02% on the dollar to $1.2207, while it strengthened 0.2% against the euro to trade at €1.1278.

“It was too much to hope that the FTSE 100 might find another burst of energy and take out the 7,900 level today, but an almost straight-line move since the beginning of the year has certainly helped put the index on top,” said IG chief market analyst Chris Beauchamp.

“So far the Christmas trading statements have been broadly encouraging, and with recession fears capped for the time being the index’s blend of global companies seems to offer a promising mix for investors looking for a home where tech stocks do not feature too highly.”

In economic news, the UK economy unexpectedly grew in November according to official data, easing recession fears.

The Office for National Statistics reported that monthly gross domestic product (GDP) nudged 0.1% higher in November, following growth of 0.5% in October.

Analysts had been expecting a 0.2% decline.

In the three months to November, however, GDP fell 0.3%, primarily due to the extra bank holiday in September for the late Queen’s state funeral.

The main driver of November’s growth was the services sector, which grew 0.2% following an increase of 0.7% in October, which the ONS revised upwards from its earlier estimate for 0.6%.

It said the largest contributions came from administrative and support services activities as well as information and communication.

The FIFA football World Cup, which kicked off on 20 November, also helped, the ONS noted.

Output in consumer-facing services grew by 0.4%, with the largest contribution coming from food and beverage services activities.

Production output decreased by 0.2%, following a fall of 0.1% in October, which was revised down from no change, dragged lower by manufacturing, which slid 0.5%.

The construction sector was flat following growth of 0.4% a month previously.

Stronger-than-expected November GDP meant the UK could now narrowly avoid recession in 2022.

There would need to be a sharp fall in December of around 0.5% assuming no further revisions, for fourth quarter growth to be negative.

A recession is technically defined as two consecutive negative quarters of GDP.

“While the economy performed better than expected in November, the data cannot mask the underlying problems in the UK economy,” said Alpesh Paleja, lead economist at the CBI.

“High inflation is severely impacting household budgets and businesses are facing intense cost pressures.

“As a result, consumer spending and investment plans are weakening.”

On the continent, industrial production unexpectedly pushed higher in the eurozone in November, according to official figures released earlier.

According to Eurostat, seasonally-adjusted industrial production rose 1%, and by 0.9% across the wider 27-member bloc.

In October, industrial production fell by 1.9% in both the eurozone and the EU.

Analysts had been expecting a rise of 0.5% in the eurozone, while year-on-year, industrial production rose by 2% in both the single currency area and the EU.

The German economy meanwhile grew a touch more than expected last year, but growth likely stagnated in the final quarter according to an initial estimate from Destatis.

The economy grew 1.9% on the year in 2022, down from 2.6% in 2021 and versus expectations of 1.8% growth.

“In 2022, the overall economic situation in Germany was affected by the consequences of the war in Ukraine and the extremely high energy price increases,” said Dr Ruth Brand, president of the Destatis federal statistical office.

“There also were serious material shortages and delivery bottlenecks, massively rising prices, for example of food, skilled labour shortages, and the continuing though fading Covid-19 pandemic.

“Although these difficult conditions persist, the German economy as a whole managed to perform well in 2022.”

Across the pond, US central bank survey data published overnight suggested that wage growth decelerated "notably" at the end of 2022.

The Federal Reserve Bank of Atlanta's Fed Wage Tracker year-on-year rate of increase slowed to 5.5% in December in unweighted terms from 6.5% for November.

That made for the second-largest drop going back to 1983.

Staying stateside, consumer confidence in the US improved for a second month from a low base at the start of 2023, according to a closely-followed survey.

The University of Michigan's consumer confidence index rose to 64.6 in early January from 59.7 in December, against consensus expectations for 60.5, driven by improved sentiment around personal finances.

Finally on data, both exports and imports plunged in China last month according to official data released earlier on Friday, as Covid-19 tore through the economy and global demand weakened.

Exports contracted by 9.9% in December year-on-year, following an 8.7% fall in November. December’s decline was the worst since February 2020, although it was ahead of forecasts for a 11.1% slide.

Imports fell 7.5%, although that was a marginal improvement on November’s 10.6% decline and better than forecasts for a 9.8% drop.

On London’s equity markets, NatWest Group rose 2.61% and Lloyds Banking Group was ahead 1.77%, while British Gas owner Centrica added 1.6% after it upgraded its earnings guidance on Thursday.

Taylor Wimpey gained 1.86% after the housebuilder said full-year operating profit was set to be in line with market views, but cautioned that sales remain "significantly" below the third quarter of last year amid rising mortgage rates and ongoing market uncertainty.

JD Sports Fashion reversed earlier losses to rise 0.25%, having gained on Wednesday and Thursday after the sportswear retailer upgraded its full-year profit guidance.

Wizz Air made gains of 2.89% after an upgrade at Davy, which also provided lift of 3.13% for sector peer easyJet.

On the downside, gambling firm 888 Holdings was 4.55% weaker after it announced the departure of its chief financial officer and reported a 3% fall in group revenues for 2022.

Bulmers and Magners owner C&C Group tumbled 9.03% after it downgraded its full-year profit expectations, citing cost-of-living pressures on consumers.

Educational publisher Pearson was on the back foot by 0.95%, even after Barclays said it was a buyer of the shares and that the company’s trading update next Wednesday could be a positive catalyst.

Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Abigail Townsent and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,844.07 0.64%
FTSE 250 (MCX) 19,952.84 0.56%
techMARK (TASX) 4,538.38 0.60%

FTSE 100 - Risers

Rolls-Royce Holdings (RR.) 108.76p 4.58%
Haleon (HLN) 325.00p 3.64%
Airtel Africa (AAF) 118.30p 3.59%
International Consolidated Airlines Group SA (CDI) (IAG) 157.32p 2.92%
Glencore (GLEN) 558.40p 2.70%
NATWEST GROUP (NWG) 295.00p 2.61%
Barclays (BARC) 180.74p 2.07%
3i Group (III) 1,437.50p 1.88%
Taylor Wimpey (TW.) 114.75p 1.86%
AstraZeneca (AZN) 11,656.00p 1.82%

FTSE 100 - Fallers

Fresnillo (FRES) 949.00p -1.96%
Aviva (AV.) 444.20p -1.66%
British American Tobacco (BATS) 3,124.00p -1.53%
Anglo American (AAL) 3,568.00p -1.46%
Ashtead Group (AHT) 4,997.00p -1.44%
Sainsbury (J) (SBRY) 241.00p -1.43%
SEGRO (SGRO) 839.40p -1.18%
Mondi (MNDI) 1,489.50p -1.16%
Rio Tinto (RIO) 6,219.00p -1.10%
BT Group (BT.A) 127.00p -1.05%

FTSE 250 - Risers

ASOS (ASC) 745.00p 5.15%
Bridgepoint Group (Reg S) (BPT) 229.40p 4.90%
Molten Ventures (GROW) 408.40p 4.72%
FirstGroup (FGP) 109.00p 4.52%
Carnival (CCL) 759.80p 4.51%
Dechra Pharmaceuticals (DPH) 2,948.00p 4.32%
Spectris (SXS) 3,250.00p 4.17%
Digital 9 Infrastructure NPV (DGI9) 91.10p 4.00%
Moneysupermarket.com Group (MONY) 213.80p 3.99%
Wood Group (John) (WG.) 156.40p 3.68%

FTSE 250 - Fallers

C&C Group (CDI) (CCR) 167.20p -9.03%
Moonpig Group (MOON) 116.80p -4.58%
888 Holdings (DI) (888) 89.25p -4.55%
Pennon Group (PNN) 930.50p -4.17%
Direct Line Insurance Group (DLG) 176.00p -3.75%
Hilton Food Group (HFG) 597.00p -3.40%
Playtech (PTEC) 526.50p -3.39%
Volution Group (FAN) 401.50p -2.67%
Paragon Banking Group (PAG) 567.00p -2.58%
Hammerson (HMSO) 26.99p -1.89%