Shares in London quoted on Wednesday, despite GDP numbers confirming the worst recession on record for the UK.
Data released on Wednesday confirmed that the UK economy shrank by 20.4% in the second quarter, officially heading for a recession and marking the worst COVID-19 decline of any developed nation economy.
Despite this, the FTSE 100 (^ FTSE) was the best performing index in Europe, rising by 1.5 noon. The index was buoyed by strong profit reports from companies such as Just Eat Takeaway, M&G, and Admiral.
The more stupidly focused FTSE 250 (^ FTMC) index was flat. The pound was down half a percent against the euro (GBPEUR = X) but flat against the dollar (GBPUSD = X).
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Analysts said that investors for the most part had prices in expectations of a sharp fall in GDP.
“It was a lot of anticipation,” said Russ Mold, investment director at stockbroker AJ Bell.
The data also showed that the UK economy returned to growth in June, marking one of the shortest recessions on record.
“From an outpoint point of view, the low point is probably behind us, which means that the key focus now is what lies ahead,” said Michael Hewson, chief market analyst at CMC Markets.
Economists said the UK would probably not make up for all the lost ground this year. Barclays downgraded its growth forecast on Wednesday, saying it now expects a 10% drop in GDP over 2020.
“A resurgence in COVID-19 caseloads and Brexit risks are additional factors that suggest the UK economy could undercut its peers,” economists wrote at the bank.
Deutsche Bank also flags Brexit risks, as well as the ‘premature’ end of government support through the furlough scheme.
“This we think will dampen growth in Q4 (and beyond),” wrote economist Sanjay Raja.
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Stock markets across Europe had turned positive by mid-afternoon, following a cautious opening.
The DAX of Germany (^ GDAXI) was 0.3% higher, the CAC 40 of France (^ FCHI) was 0.7% higher, the IBEX 35 of Spain (^ IBEX) was 0.5% higher, and the FTSE MIB of Italy (FTSEMIB.MI) was 0.8% higher.
Markets were buoyed by an opening rally on Wall Street. The S&P 500 (^ GSPC) was up 0.9% shortly after opening, while the Dow Jones (^ DJI) was up 0.7% and the Nasdaq (^ IXIC) was up 1.3%.
It marked a rebound for US markets following a late sell-off during Tuesday’s trading session. Analysts said the trigger was comments from Mitch McConnell, the U.S. Republican leader in the Senate, suggesting that no progress had been made on stimulus talks.
Remarks by Republican First Chamber member Mitch McConnell spoke to Wall Street. Photo: Caroline Brehman / CQ-Roll Call, Inc. via Getty Images
McConnell told Fox News that there has been no dialogue between the White House and Democrats.
“Another day has been spent with an accident and they need to get together,” he said.
Sebastien Galy, a senior strategist at Nordea’s bank, wrote in a morning note: ‘The problem is that Mitch McConnell is in trouble at home because benefits in Kentucky are booming and businesses are furious.
“The fuse is therefore lit on opposite sides of the island and it is probably a matter of two weeks before we get a deal. There is a natural cooling off period after a burglary with an eye on the public. ”
Gold and silver suffered their worst loss of one day in years on Tuesday, but had found a floor on Wednesday afternoon. Gold futures (GC = F) were up 0.1% to $ 1,948.80 per ounce, while silver (SI = F) had offset previous losses and was down just 0.7% to $ 25.85.
Shares were mixed in Asia last night. Japanese Nikkei (^ N225) rose 0.4% and Hong Kong Hang Seng (^ HSI) added 0.8%. The Shanghai Composition (000001.SS) dropped 0.7% and the Shenzen Component (399001.SZ) rose 1.2%. ASX 200 of Australia (^ AXJO) fell 0.1%.
