FTSE 100 shrugs off weak GDP data as global markets rebound
UK equities join European rally despite disappointing growth figures, with traders pricing in more Bank of England rate cuts.
Global risk appetite drives FTSE higher
The FTSE 100 edged 0.3% higher on Thursday, joining a broader rally across European markets that saw the Euro Stoxx 50 hit fresh all-time highs. The advance came despite disappointing UK economic data, as traders shrugged off domestic concerns in favour of the global risk-on mood following this week's Federal Reserve (Fed) meeting.
Banks and miners led the UK benchmark higher, with financials gaining ground as rate-cut expectations for the Bank of England (BoE) increased. The index remains below its recent peak, however, suggesting some caution persists. The FTSE's performance stands in contrast to the gloomier picture painted by October's gross domestic product (GDP) figures.
Fed dovishness outweighs Oracle disappointment
US markets provided the catalyst for Thursday's European rally, with the Fed's dovish tone this week reassuring investors that monetary support remains on the table. The central bank's messaging has shifted the focus away from individual earnings disappointments, including Oracle's post-results weakness that sent its shares tumbling.
Technology stocks bore the brunt of Oracle's miss, but the damage remained contained. The broader market shrugged off the setback, with financials and industrials offsetting tech weakness. This rotation demonstrates healthy market breadth, rather than the narrow leadership that characterised much of 2024.
UK economy contracts for second month
Britain's economy contracted by 0.1% in October, marking the second consecutive monthly decline and falling short of forecasts for flat growth. The three-month trend also showed a 0.1% contraction, the first since late 2023, raising the uncomfortable prospect of a marginal quarterly downturn.
Services output slipped 0.3%, with computer programming and consultancy sectors showing notable weakness. Construction disappointed, while manufacturing bore the brunt with motor vehicle production plunging following the Jaguar Land Rover cyberattack. The consecutive monthly contractions will fuel concerns that the UK is flirting with recession.
Gilt yields fall as rate cut bets build
UK government bonds rose modestly after the GDP miss, with the 10-year yield dropping about 1 basis point. Traders now expect around 60 basis points of cuts by end-2026, roughly 3 basis points more than before the data.
Stock movers tell the story
Card Factory shares plunged 26% after slashing guidance, citing weaker Christmas trading. Harbour Energy jumped 6% after announcing a North Sea acquisition, while InterContinental Hotels Group (IHG) gained following an analyst upgrade. The divergence reflects the market's increasingly selective approach, with fundamentals mattering more than general risk appetite.
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