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(Alliance News) - London's blue chip index managed to close out the highly-volatile week on the front foot Friday, but was sitting behind European peers, getting a boost from an unexpectedly strong performance from the UK economy.
Pierre Veyret, technical analyst at ActivTrades, said: "Investors drove most benchmarks higher on Friday, in a corrective bullish move following another annual low in session yesterday, as they cheered positive macro data from the UK, France and Germany."
UK gross domestic product saw surprise second quarter growth, defying an earlier estimate and providing some much-needed good news for the economy, figures on Friday showed.
The UK economy is now estimated to have grown 0.2% in the second quarter from the first, according to the Office for National Statistics. This compares with a previous estimate that had indicated a 0.1% contraction.
Consensus, according to FXStreet, had not been expecting any revision to the figures.
This follows 0.8% growth in the first quarter from the final quarter of 2021.
On an annual basis, gross domestic product grew by 4.4% in the second quarter. This compares with a previous estimate of just 2.9%.
It is still a sharp slowdown from the 8.7% annual growth seen in the first quarter, however.
"The overall trading mood remains strongly risk-off this week, as reasons to stay long become harder to find for asset managers, and stock indices keep trading inside their bearish channel despite today’s bullish price action," Veyret added.
The FTSE 100 index closed 12.22 points higher, 0.2%, at 6,893.81 - but sunk 1.8% over the past week.
The FTSE 250 closed up 377.94 points, 2.3% at 17,168.34, clawing back some of the steep 4.5% loss seen over the past five days, and the AIM All-Share closed up 7.99 points, 1.0%, at 806.38 - but fell 3.3% this week.
The Cboe UK 100 closed up 0.6% at 689.35, the Cboe UK 250 added 2.0% at 14,652.08, and the Cboe Small Companies closed up 1.2% at 12,727.39.
Offering another boost to equities, the UK government will "work closely" with the Office for Budget Responsibility in the coming weeks after a key meeting between the prime minister, chancellor and officials from the independent spending watchdog.
A Treasury read-out following the meeting said a highly-anticipated OBR forecast will be published on November 23, when the chancellor is due to reveal his medium-term fiscal plan.
Joshua Mahony, senior market analyst at IG, said: "Fortunately, the surprise 0.2% GDP reading for Q2 helped alleviate fears that the UK was in recession as claimed by the Bank of England, but pressures are sure to ramp up as we move towards a difficult second half of the year."
The UK's housebuilders were enjoying a bright session, ending a tumultuous week on an upward swing.
Barratt gained 5.8%, Persimmon 5.3%, Berkeley 3.7% and Taylor Wimpey advanced 3.8%.
In European equities on Friday, the CAC 40 in Paris closed up 1.5%, while the DAX 40 in Frankfurt advanced 1.2%.
Inflation in the eurozone is forecast to accelerate faster than expected in September, according to preliminary figures from the statistical office of the EU.
Eurostat's flash estimate showed annual inflation is expected to reach 10% in September, picking up pace from 9.1% in August.
Inflation sped up quicker than predicted, overshooting FXStreet-cited consensus of 9.7%.
On a monthly basis, consumer prices rose 1.2% in September, quickening from 0.6% in August.
The figure was in line with consensus.
IG's Mahony added: "With Russia annexing regions of Ukraine, and the Nord Stream pipelines out of action, European inflation will likely remain elevated as they pay a premium to import energy from further afield."
Back in London, Pennon gained 2.5%.
The water utility said it traded in line with expectations in the first half ended September 30, despite tough macro-economic conditions. It hailed its progress in achieving on outcome delivery incentives.
"South West Water delivered the second highest ODI performance in the sector for 2021/22, and as a group we are on track for a net positive ODI outcome in 2022/23," Pennon added.
The company said 95% of its energy usage for financial 2023 is hedged, though it expects total power costs to now be around GBP50 million higher year-on-year. In addition, it said it is allocating GBP160 million for investment in renewable energy generation.
In the midcaps, chemicals firm Synthomer jumped 18%, clawing back some lost ground after it lowered annual earnings guidance on Thursday. It had closed down 48%.
JLEN Environmental Assets gained 5.9% after it said it has bought a 50% equity stake Gigabox No 4, which holds the development rights to construct a battery energy storage plant in Scotland.
The environmental infrastructure investment fund said the 49.9 megawatts lithium-ion battery energy storage plant is based in Angus, Scotland.
The acquisition will see JLEN invest up to GBP16.4 million, with construction ready to start in early 2024.
In FX, the pound has managed to recoup the entirety of its budget sell-off over the week.
The pound was quoted at USD1.1149 Friday evening, higher compared to USD1.1033 at the close on Thursday. Last Friday morning, before the budget, sterling was trading at about USD1.11. During the week it fell to a historic low of USD1.0533.
Fawad Razaqzada, market analyst at City Index and FOREX.com, said: "The BoE is pressing the brake and accelerator at the time, which is going to break something. And that something could be the pound.
"The BoE wants to bring yields lower by buying bonds at an 'urgent pace' and on 'whatever scale', while hiking interest rates at the same time. To make matters worse, a week on from Kwasi Kwarteng’s very controversial mini-budget, there’s still no clarity if under-pressure chancellor will make a U-turn on their tax-cutting, for the very rich, plan. It comes ahead of Saturday's changes to the price cap on energy bills, which should further squeeze the cost of living. A general election is looking increasingly likely with Labour now leading the polls."
The euro stood at USD0.9796 on Friday, higher against USD0.9781 at the same time on Thursday.
Against the yen, the dollar was trading at JPY144.68, higher compared to JPY144.48 late Thursday.
Stocks in New York were higher, with the DJIA up 0.4%, the S&P 500 index up 0.8%, and the Nasdaq Composite was 1.2% higher.
The Federal Reserve's preferred inflationary gauge increased by 0.4% in August against the previous month, according to estimates released by the US Bureau of Economic Analysis.
On an annual basis, the US personal consumption expenditures index increased by 6.2%, slowing from a 6.4% annual rise in July.
Consensus, cited by FXStreet, was for a 0.3% monthly increase and a 6.6% yearly increase.
Brent oil was quoted at USD86.35 a barrel on Friday evening, down from USD88.58 late Thursday. Gold was quoted at USD1,672.50 an ounce Friday, up against USD1,658.20.
In the international economic events calendar on Monday, there is a slew of manufacturing PMI figures due, with Germany at 0855 BST, eurozone at 0900 BST, the UK at 0930 BST and the US at 1445 BST. The ISM manufacturing PMI is due at 1500 BST.
Financial markets in China will be closed for National Day.
In the local corporate calendar, there is annual results from flooring manufacturer James Halstead and interim results from Tortilla Mexican Grill. Waste management firm Renewi will issue a trading statement.
By Paul McGowan; paulmcgowan@alliancenews.com
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