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FTSE outperforms against peers despite concern over UK economy

·Business Reporter, Yahoo Finance UK
·3-min read
Financial district in London. The FTSE was treading water
A fresh wave of negative sentiment over the UK's economic outlook caused the FTSE to be muted on Friday. Photo: Yann Tessier/Reuters

European stock markets were mixed on Friday as soaring inflation drove UK debt costs higher.

In London, the FTSE 100 (^FTSE) was 0.1% higher by the end of the day, pushed higher by a weaker pound, which tumbled to a four-week low against the dollar. Meanwhile the CAC (^FCHI) tumbled 1% in Paris, and the Frankfurt DAX (^GDAXI) was 1.2% lower.

It came as UK public borrowing hit £4.9bn ($5.8bn) in July — much larger than the £0.2bn expected by the fiscal watchdog.

This took the total for 2022-2023 so far to £55bn, which is £3bn more than forecasts.

A separate survey showed that UK consumer sentiment tumbled to its lowest level on record, while the overall trend for British retail sales continues its downward spiral, with shoppers forced to pay more to buy less as inflation surges.

Sales volumes were 2.3% above their pre-COVID February 2020 levels, but down 3.3% over the past year.

The GfK consumer confidence barometer, which surveys the public about their opinion of the economy, was at its the lowest level this month since records began in 1974.

"Consumer confidence is rock bottom. The long hot summer is in its dying days and as nights draw in the sums become even more difficult," Danni Hewson, AJ Bell financial analyst, said.

"GFK’s consumer confidence index has dropped to the lowest point since records began almost 50 years ago. Many people are struggling and they’re looking at the headlines and their terrified of what’s to come. They’ve stopped subscriptions, switched brands and dipped into any savings they might have had.

“Things have been tough and they’re just going to get tougher, and retailers know that’s going to hit their bottom lines hard. The golden quarter is likely to lose something of its shine this year and that’s worrying to a sector that had been hoping for a post-COVID boom.”

Read more: 45 million Britons to be pushed into fuel poverty by January, study warns

Across the pond on Wall Street, the S&P 500 (^GSPC) dipped 1.2% and the tech-heavy Nasdaq (^IXIC) fell 1.8% at the time of the European close. The Dow Jones (^DJI) edged 0.7% lower.

On Thursday Wall Street managed to finish higher, helped by a rebound in the energy and basic resource sector.

The US dollar pushed up to its highest levels in a month after the latest weekly jobless claims unexpectedly fell back from the previous week.

Michael Hewson of CMC Markets said: “The publication on Wednesday of the latest Fed minutes didn’t add much to the overall understanding of whether the central bank was inclined to be more hawkish or dovish as we head towards the end of the year.

“Investors still appear to be trying to convince themselves that the US central bank will eventually be forced to pivot when it comes to the current trajectory of its interest rate policy.”

Watch: How does inflation affect interest rates?

Stocks in Asia tumbled into the red overnight thanks to concerns about the health of China's economy.

The Hang Seng (^HSI) fell 0.1% in Hong Kong, and the Shanghai Composite (000001.SS) dipped 0.6% on the day.

In Japan, the Nikkei (^N225) fared slightly better, closing flat due in part to a renewed slide in the yen.

Watch: What are SPACs?