It has been confirmed the UK is not in a recession. UK growth was completely flat in Q4 2022 after contracting in 0.2% in Q3. The flat growth rate means the UK has avoided a technical recession of two quarters of contracting GDP.
There was initial mild strength in the pound on the news and the inverse relationship with the FTSE 100 kicked in, sending the FTSE 100 back beneath 7,900. As the session progressed, the pound weakened against the dollar, but didn’t provide any reprieve for stocks.
“News that the UK has managed to avoid being in a technical recession gave a small lift to the pound, putting it briefly at $1.2130, but still some way off the $1.2434 level seen in January. Zero GDP growth is hardly a reason to celebrate, and markets are certainly not jumping for joy,” said Russ Mould, investment director at AJ Bell.
“The FTSE 100 slipped back 0.3% as a stronger pound is bad for the large number of companies which earn in US dollars but whose share prices are sterling-denominated. Miners certainly fall under this category and the broader basic material sector was down in the dumps on Friday.”
The FTSE 100 shied away from 8,000 and was trading down by 0.6% to 7,860 shortly after lunch on Friday. The FTSE 100 is up 5.5% so far in 2023 while the mid cap FTSE 250 is up 6%. London’s AIM has gained 5% in 2023.
Standard Chartered
Standard Chartered was one of the casualties on Friday after the First Abu Dhabi Bank ruled out a takeover of the emerging markets focused institution.
“First Abu Dhabi Bank PJSC notes the recent press speculation in relation to Standard Chartered and re-iterates that it is not evaluating a possible offer for Standard Chartered,” First Abu Dhabi Bank said in a statement.
BP & Shell
On a day 90% of the FTSE 100 constituents were trading in the red, BP and Shell provided some support for the index as oil prices rose.
BP and Shell have both reported bumper profits in recent weeks with high levels of cash generation. Investors are clearly positioning for increased distribution of this cash in the future.
Morgan Stanley cut Shell to underweight with a 2,625p price target on Friday.