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FTSE and Wall Street surge ahead despite warning of longest UK recession in a century

 FTSE  EMBARGOED TO 0001 THURSDAY NOVEMBER 3 File photo dated 06/10/21 of office workers and commuters walking through Canary Wharf in London, as almost half of employees have had their accent mocked, criticised or singled out in a social setting, while a quarter said this treatment has taken place in a work situation, according to research.
The FTSE 100 rose 0.7% after opening on Friday. Photo: PA

The FTSE 100 (^FTSE) stormed higher on Friday as traders digested the Bank of England’s (BoE) interest rate rise to 3%, and a warning that Britain faces its longest recession since the 1920s.

London’s benchmark index rose 2% by the end of the day, boosted by a weaker pound, while the CAC (^FCHI) advanced 2.5% in Paris, and the DAX (^GDAXI) was 2.4% higher in Frankfurt.

On Thursday, the BoE raised the UK interest rates by 75 basis points, its biggest hike in 33 years. The hike will push up mortgage bills for millions of people in the coming months.

The news initially sent the pound tumbling nearly 2% against the dollar, before it recovered on Friday, leaving it on track for its worst week since Kwasi Kwarteng's mini-budget six weeks ago.

Michael Hewson of CMC Markets said: “The key message was that rates were unlikely to go anywhere near as high as markets were pricing, with the central bank keen to blame the recent mini-budget for the fact that the outlook was so gloomy, and that they were doing their best to try and keep rates as low as possible.”

Read more: National Grid to offer £100 energy bill discounts to avoid blackouts

News in the eurozone revealed that German industrial orders declined more than expected in September, adding to fears that Europe’s largest economy is sliding into recession.

The data showed that new factory orders fell by 4.0% month-on-month, including a 7% tumble in foreign orders. Analysts had expected a much smaller fall, to 0.5%.

Watch: What is a recession and how do we spot one?

Across the pond on Wall Street, the S&P 500 (^GSPC) rose 0.3% by the time of the European close, and the tech-heavy Nasdaq (^IXIC) climbed 0.1% higher. The Dow Jones (^DJI) gained 0.2%.

It came as the US economy added 261,000 jobs in October, more than analysts had forecast. The latest Non-Farm Payroll (NFP) jobs report beat expectations, despite pressure from soaring inflation and rising interest rates. Economists had forecast a rise of around 200,000 jobs over the period.

The Bureau for Labour Statistics said, average hourly earnings rose by 0.4% month-on-month, more than the 0.3% expected, while the unemployment rate rose to 3.7%, from 3.5%.

There were notable job gains for Americans in healthcare, professional and technical services, and manufacturing.

Read more: UK construction activity continues to rise but new orders fall

Callie Cox, investment analyst at eToro, said: “Hiring is still strong, but there are signs of weakness creeping into jobs data. Unemployment is starting to tick up again and the labour force participation rate is falling.

"Wage growth is also slowing, which is what the Fed wants to see in the context of higher inflation. Overall, this report shows that the Fed’s medicine is working, which is a step in the right direction if you want to get inflation under control."

Meanwhile, workers at Twitter (TWTR) are suing Elon Musk after the billionaire started mass sacking across the social media company just a week after acquiring it.

He plans to sack as many as 3,700 workers, representing around half the workforce. The company’s offices are temporarily closed while staff wait to hear if they have been retained or fired.

Employees have filed a class-action lawsuit against the firm, saying the lack of notice is in violation of federal and state law.

Shares were mostly higher in Asia on Friday led by a 5.4% jump in Hong Kong’s Hang Seng index (^HSI) as Chinese markets were lifted by speculation that Beijing might begin to ease COVID restrictions.

The Shanghai Composite (000001.SS) rose 2.4% on the day, while the Nikkei (^N225) fell 1.7% in Tokyo after markets in Japan were closed on Thursday for a holiday.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “China’s impenetrable policies have caused a great deal of economic pain, both inside and outside the country. Supply chains, manufacturing and demand have all come under very serious pressure. Any indication that some rules could be relaxed would be an immediate dose of grease in the jarring cogs of China’s economy.

Watch: How does inflation affect interest rates?