London’s financial markets and the pound made gains on Thursday despite the news the UK economy slid into recession in the latter half of 2023.
The Office for National Statistics (ONS) estimated that UK gross domestic product (GDP) declined by 0.3% over the final quarter of the year.
It followed a decline of 0.1% in the previous three months and met the definition of a technical recession – two consecutive quarters of economic decline.
The gloomy announcement however only managed to boost sentiment among traders and analysts, with many suggesting the confirmation of negative economic growth could lead to interest rate cuts to stimulate more activity.
The FTSE 100 moved 0.38%, or 29.13 points, higher to finish at 7,597.53.
The pound was up 0.1% at 1.257 US dollars but was nonetheless 0.16% lower at 1.168 euro at market close in London.
Laith Khalaf, head of investment analysis at AJ Bell, said: “It’s notable that the FTSE 100 reaction following the news of the economic contraction was in fact positive, which tells us that recession is water off a duck’s back for UK investors.
“Actually the market is probably more focused right now on when the first interest rate cut will come, and a recession makes that more likely to be sooner rather than later.”
Elsewhere in Europe, markets moved similarly upwards as they also took the news that Japan entered a recession as another signal pointing towards potential global interest rate reductions.
The German Dax index was up 0.6% at the close and the Cac 40 closed up 0.86%.
Stateside, the picture was more mixed, with the Dow Jones and S&P 500 rising but weakness in technology stocks impacted the NASDAQ.
In company news, British Gas parent group Centrica saw shares lift as it revealed a surge in profits in its retail arm.
The division, which is mainly made up of British Gas, saw profit soar from £94 million in 2022 to £799 million last year.
However, the whole group’s adjusted profit fell to £2.8 billion before tax, compared with £3.2 billion the year before.
Shares in Centrica closed up 1.8p at 136.2p.
Jet2 flew higher after it revealed demand for package holidays soared as Britons prioritise “time away from our rainy island”.
The holiday firm told investors it was expecting its profit for the year to be higher than previously thought, driving shares 34p higher to 1,360p at the close.
Close Brothers tumbled by 89.6p to 308.4p at the end of trading after the merchant bank scrapped its dividend in the face of a potential impact from a regulatory probe into motor finance.
The price of oil moved higher once again amid continued concerns over the impact of volatility in the Middle East on energy supply.
A barrel of Brent crude oil was up by 1.83% to 83.09 US dollars as markets were closing in London.
The biggest risers on the FTSE 100 were Croda, up 159p to 5,024p, Kingfisher, up 6.6p to 225.1p, Fresnillo, up 12.4p to 478.9p, NatWest Group, up 5.3p to 214.3p, and Rolls-Royce, up 7.8p to 320p.
The biggest fallers on the FTSE 100 were Imperial Brands, down 61.5p to 1,830.5p, Pershing Square, down 66p to 3,828p, BP, down 7.75p to 468.75p, Marks & Spencer, down 3.2p to 231.7p, and Shell, down 33.5p to 2,464p.