Proactive Investors - The FTSE 100 headed lower on Friday despite the UK economy growing stronger-than-expected between April and June boosting hopes a recession can be avoided.
At 8.09am, London's lead index was down 45.57 points, 0.6%, at 7,573.03 while the FTSE 250 slipped 32.35 points, 0.2%, at 18,961.46.
Figures from the Office for National Statistics showed output rose 0.2% in the second quarter ahead of City hopes for zero growth and the Bank of England’s own projections of 0.1%.
Output bounced 0.5% in June, more than double City predictions, after after an unrevised fall of 0.1% in May 2023 and growth of 0.2% in April 2023.
“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,” said Matt Britzman, equity analyst at Hargreaves Lansdown (LON:HRGV).
Samuel Tombs at Pantheon Macroeconomics thinks "that the rate of quarter-on-quarter growth in GDP in Q2 can at least be maintained going forwards."
He reckons households "probably will build upon Q2’s 0.7% quarter-on-quarter increase in their real expenditure," as he expects "households’ real incomes to continue to rise further, as prices continue to rise less quickly than wages."
"We still think the economy will avoid a recession, with GDP rising by 0.3% quarter-on-quarter in both Q3 and Q4," Tombs estimated.
With company news thin on the ground there are a couple of broker notes driving share prices.
Capita PLC (LON:CPI) is 4.5% higher after Shore Capital upgraded to buy from hold while Domino's Pizza Group PLC fell 2.1% after Deutsche Bank (ETR:DBKGn) downgraded to hold from buy.
UBS abandons governement support for CS deal
Over in Europe now and news that UBS has decided to end an agreement with the Swiss government to cover losses it could incur from the rescue of Credit Suisse (SIX:CSGN).
The Swiss bank on Friday said that it would voluntarily terminate the loss protection agreement (LPA), as well as a SFR100 billion liquidity lifeline from the Swiss National Bank, effective immediately.
“After reviewing all assets covered by the LPA since the closing in June and taking the appropriate fair value adjustments, UBS has concluded that the LPA is no longer required,” the bank said in a statement.
Under the terms, UBS (LON:0R3T) was to assume the first SFR5 billion of losses, with the government stepping up to take on the next SFR9 billion.
The backstop agreement was put in place to seal the enforced marriage when Credit Suisse hit problems in March.
There has been a lot of politicial pressure calling for the agreement to end as well.