London close: Stocks mixed as recession fears reignite

(Sharecast News) - London stocks were mixed by the close on Friday, after a more sour session on the back of the increased prospect of a looming recession. The FTSE 100 ended the session down 0.78% at 7,318.04, while the FTSE 250 was ahead 1.23% at 19,616.21.

Sterling was struggling for direction as well, last gaining 0.67% on the dollar to $1.1794, while it traded 0.53% weaker against the euro at €1.1412.

"European markets got off to a strong start today, building on yesterday's US CPI-inspired gains, after China announced it was relaxing some of its Covid quarantine restrictions - however, the momentum has started to tail off heading into the weekend," said CMC Markets chief market analyst Michael Hewson.

"The FTSE 100 has found itself slipping back with the more defensive areas of the market coming under pressure."

It had still been a strong week for markets generally, Hewson noted, with Germany's DAX closing higher for the sixth week in a row.

"It's hard to escape the feeling that once again markets appear to be getting slightly ahead of themselves, given that the quarantine time in China is still quite long, and that Covid infection rates are rising and not decreasing.

"Guangzhou - a city of over 15 million people - [is] on the brink of a new lockdown."

In economic news, the British economy shrank by 0.2% in the last quarter according to fresh official data, leaving the UK on the brink of recession.

The latest estimates from the Office for National Statistics showed GDP falling 0.2% in the three months through September, compared to a rise of 0.2% in the second quarter.

Production output fell by 1.5% in the period, making for the fifth consecutive quarter of contraction, as manufacturing output tumbled 2.3%.

In September, GDP fell by 0.6%, accelerating from a fall of 0.1% in August, which itself was revised upwards from an earlier estimate for a 0.3% contraction.

Analysts had pencilled in a 0.4% drop.

The bank holiday for the state funeral of Queen Elizabeth II, when many shops and businesses closed, weighed heavily on September's print, with services alone falling 0.8% in the month.

Britain's economy was now 0.2% smaller than it was before the Covid-19 pandemic in February 2020.

"With pressures from the cost-of-living crisis, the war in Ukraine and rising interest rates, the UK economy appears to be on track to fall into a recession by the fourth quarter, in what could be the longest period of economic contraction in at least a century," said Victoria Scholar, head of investment at Interactive Investor.

On the continent, the European Commission upgraded its forecast for eurozone growth this year, but downgraded the forecast for 2023, citing the impact of the war in Ukraine.

The EC said in its autumn economic forecast that the bloc would grow 3.2% this year, up from a forecast of 2.7% in July.

Growth next year, however, was now predicted to slow to 0.3% from a previous forecast of 1.4%, while inflation was set to ease to 6.1% in 2023 from 8.5% this year, and to 2.6% in 2024.

"After a strong first half of the year, the EU economy has now entered a much more challenging phase," the Commission said.

"The shocks unleashed by Russia's war of aggression against Ukraine are denting global demand and reinforcing global inflationary pressures.

"The EU is among the most exposed advanced economies, due to its geographical proximity to the war and heavy reliance on gas imports from Russia."

Elsewhere, official data showed inflation in Germany continuing to mount in October, reaching the highest rate since the country's reunification.

According to the federal statistics office Destatis, the consumer price index rose 10.4% year-on-year last month, compared to 10.0% in September, confirming an earlier provisional forecast and matching consensus.

On the month, the CPI of Europe's largest economy rose 0.9%.

"At 10.4%, the inflation rate has reached an all-time high since German reunification," said Destatis president Georg Thiel.

"Enormous price rises for energy products still are the main reason for the high inflation.

"But we observe more and more price increases also for many other goods and services: what has become particularly notable for households is rising food prices."

Across the pond, consumer confidence in the US fell back at the start of November as expectations for inflation in the year ahead ticked higher.

The University of Michigan's consumer confidence index retreated to 54.7, from a reading of 59.9 at the end of October.

Economists were looking for a reading of 59.6.

A key sub-index tracking consumers' expectations slipped to 52.7 from 56.2, while the sub-index linked to their assessment of the current situation fell back to 57.8 from 65.6.

Survey director Joanne Hsu said all components dropped, led by an index of buying intentions for durable goods.

That index, which improved markedly in October, slumped by 21% due to high interest rates and continued high prices.

"Overall, declines in sentiment were observed across the distribution of age, education, income, geography, and political affiliation, showing that the recent improvements in sentiment were tentative," she added.

"Instability in sentiment is likely to continue, a reflection of uncertainty over both global factors and the eventual outcomes of the election."

Sentiment had started the global day in a much rosier state, after China's Standing Committee issued new guidance slightly loosening its zero-Covid policy.

The 20 new guidelines put the onus on vaccinations and treatments, calling on government officials to be "precise" when implementing rules and to avoid overlapping measures.

A reduction in the number of days required for quarantines was another measure, allowing more quarantines at home, less PCR testing, and prohibiting the extension of lockdowns.

Local authorities were also now barred from closing down production, schools or transportation without first obtaining approval.

On London's equity markets, GSK slumped 6.01% after it said the second-line application of one of its cancer treatments would be limited following a request by US regulators.

Insurer Beazley was 7.83% weaker even after it reported a 22% rise in gross premiums for the first nine months of the year, and said initial estimated losses from Hurricane Ian would be $120m.

On the upside, Asia-focused Prudential rose 7.63% on the back of China's loosening of Covid restrictions.

Miners also got a boost from Beijing's decree, with Anglo American up 6.99%, Antofagasta ahead 5.77%, Rio Tinto Group rising 4.68% and Glencore managing gains of 0.16%.

Luxury fashion brand Burberry Group - which counts China as its largest market - also rallied, closing the day 1.9% higher.

Elsewhere, technology shares were in the green after a smaller-than-expected rise in US inflation overnight sparked hopes that interest rate hikes could be smaller going forward.

Trustpilot investor Molten Ventures surged 13.48% and Auction Technology Group jumped 11.97%.

The sentiment spilled over into the consumer sector, with online fashion giant Asos up 13.38% and technology retailer Currys 8.96% firmer.

In broker note action, M&G was lifted 1.08% by an initiation at 'buy' at Jefferies, while B&M European Value Retail jumped 7.92% after Deutsche Bank lifted its price target on the stock to 415p from 395p, following the discount retailer's half-year report on Thursday.

"B&M management came out fighting with regards to the acceleration in like-for-like trading, robust cost management continuing and the recovery in gross margin in the second half," Deutsche said.

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

Market Movers

FTSE 100 (UKX) 7,318.04 -0.78% FTSE 250 (MCX) 19,616.21 1.23% techMARK (TASX) 4,332.04 -1.54%

FTSE 100 - Risers

Ocado Group (OCDO) 812.00p 13.85% B&M European Value Retail S.A. (DI) (BME) 385.50p 7.92% Prudential (PRU) 1,000.50p 7.63% Anglo American (AAL) 3,351.00p 6.99% Antofagasta (ANTO) 1,429.50p 5.77% Schroders (SDR) 473.50p 4.99% Rio Tinto (RIO) 5,398.00p 4.86% Hargreaves Lansdown (HL.) 934.40p 4.85% Intermediate Capital Group (ICP) 1,289.50p 4.79% St James's Place (STJ) 1,207.00p 4.64%

FTSE 100 - Fallers

BAE Systems (BA.) 714.00p -8.11% GSK (GSK) 1,323.60p -6.01% Relx plc (REL) 2,235.00p -5.97% AstraZeneca (AZN) 10,598.00p -5.02% Compass Group (CPG) 1,788.50p -4.77% Imperial Brands (IMB) 1,993.50p -4.75% British American Tobacco (BATS) 3,187.00p -3.90% Rentokil Initial (RTO) 542.00p -3.70% Bunzl (BNZL) 2,933.00p -3.58% Experian (EXPN) 2,867.00p -3.08%

FTSE 250 - Risers

Molten Ventures (GROW) 471.40p 13.48% ASOS (ASC) 788.00p 13.38% Auction Technology Group (ATG) 982.00p 11.97% Moonpig Group (MOON) 179.00p 10.87% Liontrust Asset Management (LIO) 1,208.00p 10.83% Domino's Pizza Group (DOM) 281.60p 9.74% Ashmore Group (ASHM) 249.80p 9.08% Currys (CURY) 85.10p 8.96% Synthomer (SYNT) 155.70p 8.73% Abrdn (ABDN) 203.30p 8.08%

FTSE 250 - Fallers

Beazley (BEZ) 606.50p -7.83% QinetiQ Group (QQ.) 333.20p -5.56% Babcock International Group (BAB) 280.00p -4.37% Tate & Lyle (TATE) 706.80p -4.28% Man Group (EMG) 218.20p -4.08% Chemring Group (CHG) 296.50p -3.73% Serco Group (SRP) 163.70p -3.54% Telecom Plus (TEP) 2,245.00p -3.02% Balanced Commercial Property Trust Limited (BCPT) 91.90p -2.96% Warehouse Reit (WHR) 118.40p -2.95%