- FTSE 100 makes a bright start as UK Q2 GDP revised upwards
- Sterling edges higher against the US dollar
- PM and Chancellor to meet OBR
8.13am: FTSE 100 makes a bright start, sterling higher
FTSE 100 made a bright start on Friday as investors digested the latest UK GDP figures and ahead of a meeting between prime minister, Liz Truss and The Office for Budget Responsibility.
At 8.10am the FTSE 100 was 21 points at 6,902, while the broader FTSE 250 jumped 79 points to 16,869.
UK Q2 GDP figures were revised upwards to show growth of 0.2%, better than expected, but there were downward revisions to the figures for 2020. .
Capital Economics said: “The good news is that the economy is not already in recession. The bad news is that contrary to previous thinking, it still hasn’t returned to pre-pandemic levels.”
“It’s the only G7 economy in that situation and it makes the Chancellor’s fiscal plans look even more untenable.”
In corporate news, Barclays PLC (LON:BARC) had its knuckles rapped by a US regulator, agreeing a US$200mln penalty for the overselling of financial instruments, while JD Sports Fashion PLC (LON:JD) announced a partnership with fellow sportswear apparel maker Nike (NYSE:NKE).
8.00am: British pound gains; Dollar falls against Swiss franc; Euro remains under parity
The British pound is making incremental gains among the G10 set as the third quarter comes to a close.
GBP/CAD is 0.2% up at C$1.52, with similar price action being seen against the Swiss franc.
The GBP/USD pair is sitting at US$1.11, a small improvement from the previous day and marking the third consecutive day of clawbacks following the Bank of England’s sovereign bonds intervention.
Despite gains over three days, GBP/USD faces a steep hill – Source: capital.com
The US dollar is fairly soft compared to its impressive run of late, partially due to yesterday’s gross domestic product (GDP) results that showed negative growth of 0.6% (though that was to be expected).
Against the Swiss franc, the dollar lost ground, though a bullish clawback is already being entertained on the four-hour trading chart.
Bullish support on the USD/CHF pair – Source: capital.com
The Euro is still under parity against the US dollar at US$0.98, but has gained slightly against CHF and CAD.
Today’s Eurozone inflation data is expected to come in at 9.7%, and all eyes will be on how the Euro responds to actual results.
7.40am: PM and Chancellor to meet with OBR
Liz Truss will hold emergency talks with the head of Britain’s independent fiscal watchdog after failing to dampen panic in the financial markets or shore up support from Tory MPs on her radical economic plan, according to The Guardian.
In a highly unusual move, the prime minister will meet the Office for Budget Responsibility’s (OBR) Richard Hughes on Friday, along with her chancellor, Kwasi Kwarteng, before being presented with a first draft of its full fiscal forecasts next week.
Truss faces urgent calls from the Treasury select committee to bring forward the government’s financial statement, which is not due until 23 November, by at least a month – and to publish growth forecasts as soon as possible to help calm jitters.
On Thursday night the OBR confirmed that it could have produced a forecast in time for the mini-budget, but was not asked to do so by Kwarteng.
The Treasury select committee’s chair, Mel Stride, told the Guardian there was a path out of the current economic situation for the government, but added: “It’s not a very broad path. There is a lot of work to be done. This is a huge challenge.”
7.25am: UK current account deficit falls
The underlying UK current account deficit excluding precious metals reduced to £32.5bn or 5.3 % of gross domestic product (GDP) in quarter two (Apr to June), a change of £4.4bn from the previous quarter.
Figures from the Office for National Statistics showed that the UK current account deficit, when trade in precious metals is included, reduced to £33.8bn, or 5.5% of GDP in the quarter.
The ONS also said figures for the underlying current account deficit had been revised downwards to show a deficit of £37.0 billion (6.1% of GDP), from an initial estimate of £44.2 billion (7.1% of GDP).
The revision is primarily because of investment income earnings from abroad (credits) being higher than previously estimated.
7.15am: UK Q2 GDP revised upwards
Some better news.
UK GDP for quarter two of this year has been revised upwards to show growth of 0.2% from the previous estimate of a contraction of 0.1% suggesting the UK may not be in recession.
Figures from the Office for National Statistics showed that services output is estimated to have increased by 0.2% in quarter two, reflecting an easing in information and communication, and professional, scientific and technical activities output although there was also continued weakness in the wholesale and retail trade, and health industries.
We’ve published revised GDP data today including improved methods and sources https://t.co/7BFolSeRYrGDP has been revised up from -0.1% to +0.2% in Q2.
However, the overall size of the economy is smaller than previously estimated, 0.2% below its pre #COVID19 pandemic level. pic.twitter.com/FjJVPEBNGb
— Office for National Statistics (ONS) (@ONS) September 30, 2022
The latest update also contained revisions for growth in 2020 and 2021.
The ONS said estimates show that UK GDP contracted by a downwardly revised 11.0% in 2020, reflecting the effects of coronavirus (COVID-19) restrictions, while UK GDP is now estimated to have expanded by an upwardly revised 7.5% in 2021.
Overall, the level of real GDP is now estimated to be 0.2% below where it was pre-coronavirus at quarter four (Oct to Dec) 2019, downwardly revised from previous estimates of 0.6% above.
7.00am: FTSE 100 set to open slightly lower
FTSE 100 is expected to open slightly lower on Friday after another day of drama on the financial markets yesterday.
Spread betting companies are calling the lead index down by around 18 points.
UK gross domestic product figures for the second quarter are due this morning with a 0.1% decline forecast whilst Nationwide's house price data for September is also due.
UK Prime Minister Liz Truss and Chancellor Kwasi Kwarteng will meet with the head of the Office of Budget Responsibility on Friday, in the latest effort by the pair to reassure markets and voters that the economic turmoil of recent days is under control.
In the US, markets headed downwards once again as investors continued to fret that the Federal Reserve's aggressive fight against inflation could hobble the US economy and also worried about a rout in global currency and debt markets.
By the close the Dow Jones Industrial Average was 458 points, or 1.54% lower, at 29,226, the S&P 500 eased 79 points, or 2.11%, to 3,640 and the tech-heavy Nasdaq Composite slid 314 points, or 2.84% to 10,738.