Market Report: what recession? UK posts growth in Q2. Investor confidence grows

by | Aug 11, 2023

  • UK GDP grows 0.2% in Q2, FTSE100 set to open lower
  • UK investors are more confident around investing and the economy, as HL’s Investor Confidence Index moves higher
  • US markets end relatively flat as investors digest the latest inflation print
  • To infinity and beyond – Virgin Galactic completes its first flight with paying customers

Matt Britzman, equity analyst at Hargreaves Lansdown

“The FTSE100 looks set to open lower today, quickly giving up gains seen in yesterday’s session despite fresh GDP data that shows the UK economy didn’t flatline over the second quarter as some economists had predicted. We’ve got June to thank for the better-than-expected result, where growth of 0.5% pulled up the quarter after a small decline in May. These numbers push the chance of a recession further down the line, but the UK economy looks firmly stuck in a low growth cycle, and with further interest rate hikes firmly priced in by the markets – there doesn’t look to be an immediate path out.

UK investors look to have taken June’s positive inflation print as a sign of hope, and today’s GDP read should add to that, with scores for both economic growth and investor confidence rising in early August after three months of consecutive declines. But there’s no escaping the fact the UK’s inflation performance sticks out like a sore thumb compared to other global economies, and investors should strap in for further rate hikes. There are further glimmers of hope from the mortgage market, where several key lenders have lowered rates on a range of fixed-term mortgages. Let’s not get ahead of ourselves though, anyone looking to buy a first home, remortgage or move house right now is still facing some pretty gruesome looking numbers, and next week’s CPI print has a lot riding on it.

The S&P500 ended trading broadly flat, giving up early gains as investors digested US inflation numbers. The print was relatively encouraging, headline CPI of 3.2% was a touch lower than expected, and core CPI, which strips out some volatile elements like energy, was in line with expectations at 4.7%. Markets were quick to react, pushing down the implied chance of a rate hike in September to around 10% and increasing the chance of cuts coming early next year. Is it time to celebrate? Not yet. Energy and food prices in certain areas have been rising in recent months, perhaps not fully reflected in these prints. Once the effects trickle through a wider spread of goods and services, the heralded soft-landing might get a little bumpy.

Buzz Lightyear would be proud, as Virgin Galactic launched its second commercial spaceflight yesterday, its first carrying paying customers. It’ll cost you a pretty penny if you want to go and experience a couple of minutes of weightlessness. The original tickets were sold at $200,000-$250,000 over a decade ago, with more recent tickets coming it at almost double that number. This does mark somewhat of an inflection point for our access to space, it’s exciting for sure, but with profits looking like science fiction for now – there’s a lot of work before this becomes a viable long-term business.”

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