By Nikhil Sharma and Sukriti Gupta
(Reuters) -Britain’s FTSE 100 fell on Friday after data showed a surprise contraction in the country’s gross domestic product in October.
The FTSE 100 was down 0.1%, but eked out gains for a fourth week, while the midcap FTSE 250 lost 0.3% to log its first weekly loss in four, declining 0.5% in the week.
Britain’s economy shrank for a second month in a row in October in the run-up to the government’s first budget – the first back-to-back declines in output since the onset of the COVID-19 pandemic in early 2020.
Gross domestic product contracted by 0.1% month-on-month in October, as it did in September. Economists polled by Reuters had forecast a monthly expansion of 0.1%.
Finance Minister Rachel Reeves’ budget statement on Oct. 30 – whose direct impact will be felt in GDP data from November onwards – imposed large tax increases on businesses.
The pound weakened against the U.S. dollar after data showed growth surprisingly stalled in October.
The Bank of England is expected to hold rates at its policy decision next week. However, the data could prompt traders to attach a greater chance of speedier rate cuts next year. Investors will also watch for an expected rate cut from the U.S. Federal Reserve.
Separately, in good news for Reeves, British consumer morale hit a four-month high in December as households grew cheerier about their finances, a survey showed, after other indicators showed a post-budget slide in business sentiment.
Meanwhile, precious metal miners led sectoral losses, falling 3.1%, while industrial miners fell 2%, tracking copper prices that came under pressure from a stronger dollar. [MET/L]
In contrast, UK beverage stocks led the sectoral gains, rising 2.1%, as spirit maker Diageo extended its rise from the previous session and added 2.3%.
Endeavour Mining extended its losses from the previous session and fell 3% to the bottom of the FTSE 100.
Wizz Air declined 5.7% after RBC cut the target price on the airline firm to 2,500p from 2,700p.
St James’s Place rose 1.9% to hit a more than 1-year high after Deutsche Bank upgraded the British wealth manager’s rating to “buy” from “hold”, raising the target price to 1,150p from 775p.
(Reporting by Nikhil Sharma and Sukriti Gupta; Editing by Vijay Kishore, William Maclean)
