London stocks were still in the black by midday on Friday, with recently-battered housebuilders pacing the advance, as the latest GDP figures showed the UK is not yet in a recession.
The FTSE 100 was 0.6% firmer at 6,925.42, while the pound was steady against the dollar at 1.1103. Sterling fell below the $1.11 level last week, hitting its weakest level since Britain went decimal in 1971, after chancellor Kwasi Kwarteng announced a swathe of tax cuts in his so-called mini-budget.
Following a meeting with prime minister Liz Truss and Kwarteng, the Office for Budget Responsibility confirmed it will deliver an initial forecast to the chancellor on 7 October.
“The forecast will, as always, be based on our independent judgment about economic and fiscal prospects and the impact of the government’s policies,” the OBR said.
On the macro front, data released earlier by the Office for National Statistics showed that the economy nudged higher in the last quarter, reversing an earlier estimate for a small decline.
The ONS said UK GDP was estimated to have increased by 0.2% in the second quarter, after it revised its first estimate for a 0.1% contraction.
It noted that there continued to be weakness in the wholesale and retail trade, and in health industries. But services output was estimated to have increased by 0.2%, reflecting “an easing” in information and communication, and professional, scientific and technical activities output.
The ONS had previously estimated that services output had fallen by 0.4%, reflecting a reduction in Covid-19 activities.
Russ Mould, investment director at AJ Bell, said: “The pound may have returned to the levels it was at when Chancellor Kwasi Kwarteng stood to address MPs a week ago but that doesn’t mean we’ve miraculously returned to a pre-mini-Budget world.
“The currency’s recovery is predicated on more rapid and aggressive rate hiking from the Bank of England with all the implications that has for borrowers and, in particular, anyone with a mortgage.
“There are signs of a slowdown in Nationwide’s house price data for September, but these numbers belong to a different world from the one we are in now and all participants in the housing market will be nervously watching future readings for signs of how much immediate impact is being felt on property transactions.
“Also potentially helping sterling this morning was an updated estimate of GDP which suggested modest growth in the second quarter as opposed to a modest fall and signs the new Government may be recognising we are in a crisis, despite their protestations to the contrary, as Liz Truss and Kwarteng prepare for a meeting with independent fiscal watchdog the Office for Budget Responsibility.
“Though given the OBR offered a draft forecast ahead of the mini-Budget, this does rather ring of closing the stable door after the horse has bolted.”
Other figures released on Friday showed that mortgage approvals spiked in August as homebuyers scrambled to secure loans amid rising interest rates.
Investors were also digesting the latest data from mortgage lender Nationwide, which revealed that house prices were steady on the month in September following a 0.7% increase in August, and versus expectations of a 0.3% jump.
In equity markets, housebuilders were bouncing back from recent losses, with Barratt, Persimmon, Taylor Wimpey, Persimmon, Crest Nicholson and Vistry up. Property portal Rightmove was also on the rise.
Barclays was in focus as the bank agreed with the US Securities and Exchange Commission to pay $361m after control failures led it to sell $17.7bn of securities it was not allowed to issue.
Elsewhere, sportswear retailer JD Sports ticked higher after it has struck a “connected partnership” with footwear giant Nike that will give the group’s customers “unprecedented access” to select member-only shoes and apparel.
Cineworld slumped as it posted a narrowing of its interim losses but cautioned that third-quarter admissions have been below expectations and are expected to remain below pre-pandemic levels over the next two years.
Market Movers
FTSE 100 (UKX) 6,925.42 0.64%
FTSE 250 (MCX) 17,071.97 1.68%
techMARK (TASX) 4,114.36 0.27%
FTSE 100 – Risers
Barratt Developments (BDEV) 340.60p 5.32%
Persimmon (PSN) 1,222.50p 4.04%
Unite Group (UTG) 845.00p 3.74%
Taylor Wimpey (TW.) 88.26p 3.74%
Next (NXT) 4,847.00p 3.70%
Rightmove (RMV) 482.20p 3.34%
M&G (MNG) 165.10p 3.22%
Pearson (PSON) 864.20p 3.05%
SEGRO (SGRO) 738.20p 2.96%
Rolls-Royce Holdings (RR.) 70.14p 2.75%
FTSE 100 – Fallers
BAE Systems (BA.) 809.80p -1.84%
Unilever (ULVR) 4,020.00p -1.48%
Haleon (HLN) 276.45p -1.29%
Reckitt Benckiser Group (RKT) 6,058.00p -1.08%
Admiral Group (ADM) 1,918.50p -0.67%
Spirax-Sarco Engineering (SPX) 10,200.00p -0.58%
Experian (EXPN) 2,629.00p -0.38%
Glencore (GLEN) 485.20p -0.32%
Diageo (DGE) 3,770.00p -0.32%
Bunzl (BNZL) 2,741.00p -0.22%
FTSE 250 – Risers
Synthomer (SYNT) 105.90p 17.60%
Molten Ventures (GROW) 295.80p 8.67%
Balanced Commercial Property Trust Limited (BCPT) 80.10p 8.54%
Petershill Partners (PHLL) 181.20p 7.47%
UK Commercial Property Reit Limited (UKCM) 59.70p 6.80%
Jlen Environmental Assets Group Limited NPV (JLEN) 120.00p 6.76%
TP Icap Group (TCAP) 191.00p 6.23%
Bellway (BWY) 1,683.50p 6.11%
Crest Nicholson Holdings (CRST) 182.80p 5.97%
GCP Infrastructure Investments Ltd (GCP) 98.80p 5.78%
FTSE 250 – Fallers
ASOS (ASC) 574.00p -3.53%
Weir Group (WEIR) 1,362.50p -2.99%
Baltic Classifieds Group (BCG) 127.60p -2.89%
PureTech Health (PRTC) 240.00p -2.44%
Baillie Gifford Japan Trust (BGFD) 715.00p -2.05%
Dr. Martens (DOCS) 221.00p -1.78%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 466.50p -1.69%
Lancashire Holdings Limited (LRE) 497.40p -1.60%
JPMorgan Japanese Inv Trust (JFJ) 434.00p -1.36%
Ascential (ASCL) 208.80p -1.14%
