The FTSE 100 continued to be lifted by slowing US inflation on Friday, despite data showing the UK economy contracted on a quarterly basis.

The FTSE 100 index closed up 34.98 points, or 0.5%, at 7,500.89, ending the week overall 0.8% higher and notching its fourth consecutive weekly gain.

The FTSE 250 ended up 93.53 points, or 0.5%, at 20,338.96, rising 1.4% over the course of the week. The AIM All-Share closed up 4.84 points, or 0.5%, at 933.20, gaining 1.4% since the start of the week.

The Cboe UK 100 ended up 0.4% at 749.39, the Cboe UK 250 closed up 0.6% at 17,673.64, and the Cboe Small Companies ended up 0.1% at 14,476.43.

In European equities on Friday, the CAC 40 in Paris ended up 0.2%, while the DAX 40 in Frankfurt ended up 0.7%.

It’s been a largely upbeat week for equities following data that showed both US consumer and factory price growth eased off somewhat in July.

Even news that the UK economy shrank marginally in the second quarter of the year was unable to dent sentiment on Friday.

On a quarterly basis, the UK economy contracted 0.1% in the three months to June following growth of 0.8% in the first quarter. Market consensus had pointed to a 0.2% contraction. Should the economy contract again in the third quarter, the UK will enter a technical recession.

On an annual basis, UK gross domestic product expanded 2.9% in the second quarter, slowing sharply from 8.7% growth in the first quarter. The latest reading just beat the market forecast, cited by FXStreet, for growth of 2.8%.

Last week, the Bank of England forecasted the UK economy will enter recession from the fourth quarter of 2022 and will continue to contract throughout 2023.

The pound was quoted at $1.2121 at the London equities close Friday, down compared to $1.2205 at the close on Thursday, hindered by the GDP data and a stronger dollar.

‘It is too early to start shouting ‘recession’ but the 0.1% contraction in the economy between April and June is adding to concerns that it’s most certainly round the corner. Another three months will tell the tale, and as many households are already cutting back on both discretionary spend and everyday essentials, while businesses struggle under the chokehold of sky-high inflation, the mood music is sombre,’ said Danni Hewson, financial analyst at AJ Bell.

Despite the uncertain outlook for the UK economy, Paddy Power and Sky Bet owner Flutter Entertainment said it is yet to see ‘discernible signs’ of a hit due to falling consumer confidence.

The stock closed up 14% in London on Friday, topping the FTSE 100 index.

In the six months to the end of June, Flutter’s revenue increased 11% to £3.39 billion from £3.05 billion a year earlier. However, it swung to a pretax loss of £51 million from a £77 million profit on higher operating costs.

However, it noted it has seen little evidence of consumer confidence woes hitting punter numbers.

‘We currently see no discernible signs of a consumer slow down and resultant reduced spending levels across our businesses. However, we will continue to closely monitor key spend indicators as we move through the second half given the uncertain macroeconomic outlook,’ Flutter added.

Mondi also bolstered the FTSE 100, up 11%, after agreeing to sell the Syktyvkar mill, its most significant facility in Russia, for around €1.5 billion.

The Weybridge, England-based paper and packaging firm first revealed plans to exit Russia early in May following Moscow’s invasion on Ukraine late in February. Mondi said on Friday it launched a ‘competitive auction process’ to find a suitable new owner for Syktyvkar before opting for Augment Investments.

GSK shares rose 3.6% but the stock ended the week overall down 13%. The pharmaceutical firm late Thursday sought to calm investor nerves over Zantac litigation, saying the ‘overwhelming weight’ of scientific evidence backs its case.

Ranitidine, sold under the name Zantac, was sold over-the-counter in the US by French drugmaker Sanofi and was originally manufactured by GSK. The heartburn treatment was withdrawn after the US Food & Drug Administration, in 2019, warned that Zantac contained levels of NDMA, a probable human carcinogen - a substance which has been linked to cancer.

GSK said it has been named as a defendant in around 3,000 filed personal injury cases in US federal and state court and ‘numerous’ unfiled claims. Class actions have also been filed, it said.

However, both GSK and Sanofi were confident in the science backing their cases, citing studies from the US Food & Drug Administration and European Medicines Agency which found no evidence that ranitidine causes cancer.

Pfizer and GSK spin-out Haleon also released statements. Haleon said that it is ‘not primarily liable’ for any over-the-counter or prescription claims involving Zantac.

Pfizer said it sold Zantac products between 1998 and 2006. By the time there was a withdrawal of Zantac products from the market in 2019 and 2020, Pfizer had already stopped selling it, the company explained.

Haleon closed up 2.2% in London and Pfizer shares were 2.8% higher in New York. Sanofi rose 0.8% in Paris.

In the FTSE 250, TBC Bank rose 6.7% after reporting a strong rise in income in the second quarter, as the bank’s expanded loan book benefited from improved interest margins.

In the three months to June 30, the bank reported pretax profit of ?262.6 million, about $97.2 million, falling from ?290.8 million the year prior.

888 Holdings fell 11% after reporting a falling interim profit as gambling and betting in the UK took a hit as stricter gambling policies took effect.

Pretax profit in the half-year to June 30 dived 66% to £14.4 million from £41.9 million a year ago. Revenue fell to £332.1 million from £380.9 million. 888 expects revenue in the second half to be in line with the first half.

888 explained revenue was down ‘with the majority of the business seeing relatively stable revenues, offset by declines in the UK of 25% reflecting the implementation of more stringent safer gambling policies, and the closure of the Netherlands.’ Excluding the UK and Netherlands, revenue was up 2% year over year, it noted.

Stocks in New York were higher at the London equities close, with the DJIA up 0.6%, the S&P 500 index up 0.8%, and the Nasdaq Composite up 1.2%.

The euro stood at $1.0248 at the European equities close Friday, down against $1.0328 at the same time on Thursday. Against the yen, the dollar was trading at JP¥133.63, up compared to JP¥132.79 late Thursday.

Brent oil was quoted at $97.91 a barrel at the London equities close Friday, down from $98.87 late Thursday. Gold was quoted at $1,797.13 an ounce at the London equities close Friday against $1,789.51 at the close on Thursday.

Monday’s economic calendar as Rightmove UK house prices at 0001 BST, Japan GDP at 0050 BST and Chinese industrial production and retail sales at 0300 BST, followed by Japanese industrial production at 0530 BST.

The UK corporate calendar on Monday has half-year results from Phoenix Group Holdings.

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Issue Date: 12 Aug 2022