FTSE 100 inches into green despite record plunge in UK GDP
The FTSE 100 closed 0.23 per cent up on Friday, having spent most of the session inching higher despite data showing the British economy suffered the largest contraction on record in April.
While the blue-chip managed to shake a four-session decline, it remained on track for its worst weekly drop in around three months. Cyclical stocks including bankers and insurers, which had been at the centre of Thursday’s sell-off, led the FTSE 100’s gains.
Wall Street’s main indices rebounded on Friday, recouping around half of the previous session’s sharp losses, but were still on track for their worst week in almost three months as concerns over new coronavirus infections weighed on investor sentiment.
Read more: British Airways, Ryanair and Easyjet launch quarantine legal action
FTSE 100 inches higher
The FTSE 100 inched higher in a volatile session after data showed the UK economy suffered a record contraction in April.
After dropping sharply following the open then hovering close to flat in early trading, the blue-chip index climbed steadily for most of the afternoon before reversing most of the day’s gains, ending the session 0.23 per cent up.
The shaky performance follows yesterday’s hefty correction, which saw the index suffer its largest drop since March with a fall of 3.99 per cent.
The FTSE 100 remained steady after the government “formally” confirmed that it will not extend the post-Brexit transition period beyond the end of 2020.
US shares rebound
On Wall Street, the main US indices rebounded following heavy losses on Thursday, but investor sentiment remained subdued amid fears over a second spike in virus cases and concerns over the pandemic’s economic impact.
The benchmark S&P 500 was 0.54 per cent up by 4.30pm UK time, with all major S&P sectors rising. Technology and financial shares provided the biggest boosts to the index.
Travel stocks put in a strong performance, with Boeing jumping eight per cent, looking to end the week eight per cent lower.
United Airlines Holdings, American Airlines Group, Norwegian Cruise Line Holdings Ltd jumped between 14 per cent and 19 per cent leading gains on the S&P 500 following sharp declines in the previous session.
The S&P 500 is now around nine per cent below its record high, having fallen from around five per cent that level earlier this week.
The Dow was trading 0.77 per cent higher by 4.30pm UK time, while the tech-heavy Nasdaq had risen 0.36 per cent.
“People are just taking a breather after the outright selling yesterday, like we saw back in the dark days of February and early March,” said Ryan Giannotto, director of research at Granite Shares.
“There’s always going to be more headlines about coronavirus cases increasing, more tests increasing. That’s just something that markets, investors and companies are going to have to learn to deal with.”
‘Measured’ response to dire UK GDP data
The FTSE 100’s volatile performance comes after the release of new data showing that UK GDP shrank a record 20.4 per cent in April as the first full month of lockdown hammered the economy.
“This is a record figure for a monthly fall, and showed weakness across all sectors,” said Emma Wall, head of investment analysis at Hargreaves Lansdown.
“The UK will be keeping an eye on other countries who are a few months ahead of us in the development of the virus, and those who have started to lift restrictions already to see how successful they have been.”
Spreadex’s Connor Campbell said the FTSE 100’s “measured” response to the dire GDP was partly due to the fact that the figures were “shocking, but not necessarily surprising”.
“Investors have received repeat warnings over what to expect, as recent as Wednesday’s OECD forecasts,” he added, referring to predictions released earlier this week that the UK would take the largest economic hit among G20 nations from the pandemic.
“The FTSE, and markets have a whole, have also already taken a hell of a beating this week. There may simply not be the appetite to send them any lower at the moment, regardless of what the day’s data says,” said Campbell.
Battered cyclical stocks gain some ground
Education publisher Pearson led the FTSE 100’s risers, climbing over 11 per cent after it emerged that activist investor Cevian Capital had built up a 5.4 per cent stake in the company.
Cyclical stocks including banks, insurers and energy firms, which lost the most ground during yesterday’s sell-off, also performed well.
British Gas-owner Centrica added 8.37 per cent, while miner Anglo American climbed 2.78 per cent.
Airline stocks also put in a strong performance, climbing steadily as British Airways, Ryanair and Easyjet this morning launched legal action challenging the government’s plan to make all incoming travelers to the UK quarantine for 14 days.
Easyjet shares rose as much as 8.26 per cent following the launch of the legal challenge, while British Airways owner IAG climbed over five per cent/
Shares shaky across Europe
The FTSE 100’s European peers also put in a volatile performance, with Germany’s Dax and France’s CAC 40 both starting the session firmly negative and then turning positive.
The Dax later flipped negative again, falling as much as 0.52 per cent, while the CAC 40 remained flat.
Asian equities fell sharply on Friday amid growing concerns that a resurgence of coronavirus cases could stunt the pace of recovery in economies reopening from lockdowns, or even lead to fresh restrictions.
Read more: Hong Kong lashes out at UK’s ‘biased’ remarks
MSCI’s broadest index of Asia-Pacific shares outside Japan slid 1.2 per cent, after a strong run-up in recent weeks. Australian stocks dropped 1.57 per cent, but shares in China erased losses to trade 0.03 per cent higher after Beijing’s pledge to continue with capital market reforms.
In Japan, the Nikkei 225 shed 0.75 per cent, while Hong Kong’s Hang Seng index dropped 1.05 per cent.