The FTSE 100 was relatively subdued on Friday as markets continue to digest softer economic data and weighed the prospect of recession in major economies.
After a global recession looking almost certain this year, markets had been buoyed by more optimistic forecasts.
However, this week’s poor Chinese GDP growth figures, slower than expected US and UK retail sales, and stubbornly high UK inflation once more raised concerns about the health of the global economy.
Heavy selling in Europe yesterday subsided on Friday with the FTSE 100 carving out minor gains going into the close.
There was further demonstration of positioning towards cyclical sectors and rotation away from defensive names, which provided insight into mild underlying optimism. Miners, banks and consumer shares gained while those with bond-proxy attributes fell.
Consumer shares including JD Sports, Ocado, Kingfisher and Sainsbury’s were on the up, despite disappointing UK retail sales figures for December released this morning.
It is interesting to note the disconnect between the 1% monthly drop in December’s UK retail sales measured by the ONS, and the relatively upbeat festive results from most of the FTSE 100’s consumer stocks.
SSE was one of the top risers after a positive update that included a sharp revision higher in their EPS guidance.
UK banks
Banks were among the gainers as investors positioned for higher rates. Despite concerns about global growth, central banks are predicted to hike rates further in the coming months – a major headwind for banking earnings.
“While data suggests inflation is easing in parts of the world, many central banks are still intent on raising interest rates further which creates an opportunity for banks to improve earnings, as long as they aren’t stung by rising bad debts in a recession,” said Russ Mould, investment director at AJ Bell.
Lloyds shares briefly touched the psychological 50p mark earlier this week, before falling back. Shares in Barclays, Lloyds and Natwest edged higher on Friday.