The FTSE 100 was fighting to turn positive on Thursday amid disappointment around the slow pace of UK economic growth.
Declines in UK-centric sectors, including housebuilders and retailers, sent the FTSE 100 0.1% lower as investors digested the soggy state of the UK economy, following August’s 0.1% GDP expansion.
“Rachel Reeves might be reaching for a buck’s fizz after the UK economy showed growth in August after contracting in July. However, the celebration may be short lived as a 0.1% expansion is minuscule and lower than the 0.2% growth expected by some economists,” said Russ Mould, investment director at AJ Bell.
“We’re just six weeks away from the Chancellor’s Budget and the nation is eager to know how Reeves plans to get the country moving while also repairing the black hole in public finances.
“A lot of people view the UK as being in a difficult spot – lacklustre growth and a weak financial position. The outlook is far from rosy and there is a big risk that tax tweaks could further dampen consumer and business sentiment.”
The mood was a lot more positive in the US, with banks producing bumper earnings growth and interest rate hopes overcoming concerns about Chinese tariffs.
“Monster Q3 earnings from the big banks on Wall Street supported the mood. Bank of America and Morgan Stanley joined the party started by Goldman Sachs, Citi and Wells Fargo on Tuesday,” said Saxo UK Investor Strategist Neil Wilson.
Wilson continued to explain that AI-related stocks remained a key driver of global equities amid a wave of mega deals and strong earnings from chipmakers.
“Elsewhere, AI and chips are still building a positive narrative, even if it looks like a bubble. TSMC profit jumped 39% to beat estimates and hit another record on AI chip demand. CoreWeave rose a further 4% a partnership with Poolside to provide more than 40,000 Nvidia GPUs to bolster the development of Poolside’s AI models. ASML reported bookings 10% ahead of estimates, offsetting some weakness in China.”
Earnings in the UK on Thursday weren’t as encouraging.
Whitbread was rooted to the bottom of the FTSE 100 leaderboard after the hotel group reported a 2% drop in revenue and 7% lower operating profits. Although Whitbread said falling food and beverage sales were expected, investors checked out, sending the stock 9% lower.
“Investors had clearly expected better service from Whitbread, with the shares down sharply in early trading,” said Chris Beauchamp, Chief Market Analyst at IG.
“However, it does look like a work in progress, with a steady shift to more profitable operations underway, but it seems that Whitbread might be at risk of overpromising and underdelivering, signalling it needs to manage its next few updates rather carefully”.
Croda was the top FTSE 100 riser following news that group sales grew 4% in the third quarter.