Blue chips in London nudged higher on Thursday despite sluggish economic growth in August and a 10% drop for Premier Inn owner Whitbread.
The FTSE 100 index closed up 11.34 points, 0.1%, at 9,436.09. The FTSE 250 ended 29.60 points lower, 0.1%, at 21,991.36 while the AIM All-Share was up 2.47 points, 0.3%, to 789.89.
The UK economy achieved only minor growth in August, numbers from the Office for National Statistics showed, while the reading for July was downwardly revised.
Monthly growth of 0.1% for August was reported but July’s reading was nudged down to a 0.1% decline. The ONS had initially reported that gross domestic product was flat in July.
The ONS said manufacturing production advanced 0.4% month-on-month in August, but construction output fell 0.3%, and the service sector tread water.
The tepid progress for the economy recently could prompt the Office for Budget Responsibility to downgrade its economic assessment, analysts at ING commented, a decision that in itself could hold back future growth.
Earlier this week, Chancellor Rachel Reeves acknowledged she was looking at potential tax rises and spending cuts to fill a black hole in her budget.
On Thursday, the Institute for Fiscal Studies estimated Ms Reeves will need to fill a £22 billion hole in the public finances.
The influential think tank said a weaker growth outlook, partly due to an expected downgrade in the OBR’s outlook for productivity, together with higher government spending because of inflation, would account for £11 billion of the shortfall.
The reversal of planned cuts to welfare spending would add a further £6 billion and the cost of servicing government debt at higher interest rates could add £5 billion.
The pound was quoted higher at 1.3429 US dollars at the time of the London equity market close on Thursday, compared to 1.3395 on Wednesday.
In European equities on Thursday, the CAC 40 in Paris closed up 1.4%, while the DAX 40 in Frankfurt ended up 0.4%.
In France, Prime Minister Sebastien Lecornu weathered two confidence motions, just days after appointing his new government and making a key political concession to stay in power.
The votes followed Mr Lecornu’s decision Tuesday to back suspending a divisive 2023 pension reform, in a bid to keep his cabinet afloat long enough to pass a much-needed austerity budget by year’s end.
In Zurich, Nestle stormed 9.3% higher after announcing plans to cut around 16,000 jobs globally over the next two years, as new chief executive officer Philipp Navratil steps up restructuring to revive growth and profitability at the Swiss food conglomerate.
The move forms part of an expanded cost-savings programme.
Nestle also reported third quarter organic growth of 4.3%, well ahead of 3.7% expected by analysts. Real internal growth improved to 1.5%, ahead of 0.3% consensus, recovering from negative trends earlier in the year.
“Overall we would give this an 8.5/10 and think there is enough for investors to start to think that this could be a real line in the sand, after five years of underperformance,” said analysts at Barclays.
Nestle’s improved trading gave Unilever a boost in London, rising 1.8%.
Stocks in New York were mostly higher at the time of the London close. The Dow Jones Industrial Average was little changed, the S&P 500 was 0.1% higher, while the Nasdaq Composite advanced 0.3%.
The yield on the US 10-year Treasury was quoted at 4.03%, widened from 4.02% on Wednesday. The yield on the US 30-year Treasury stood at 4.62%, widened from 4.61% on Wednesday.
US Fed governor Christopher Waller, a top contender to run the US Federal Reserve, threw his support behind a quarter-point rate cut later this month, claiming he believed inflation would soon cool.
Speaking in New York, Mr Waller said economic conditions were such that policymakers should focus their attention on the softening labour market instead.
Meanwhile, the Philadelphia Fed manufacturing index dropped to minus 12.8 in October, well below expectations for a rise of 10.0, and last month’s 23.2 level.
Goldman Sachs noted the composition was mixed-to-weak, as the new orders component increased while the shipments and employment components declined.
On the FTSE 100, Whitbread tumbled 10% as lower earnings, higher debt, and growing economic uncertainty in the UK all weighed, despite a pick-up in trading at Premier Inn.
Whitbread said pre-tax profit fell 7.1% to £287 million in the half-year that ended August 28 from £309 million a year earlier.
Russ Mould, investment director at AJ Bell, called Whitbread’s results “another weak performance”, saying that earnings in reverse and net debt on the rise is the “kind of news that makes investors suffer from insomnia”.
Net debt increased to £563 million from £370 million a year ago, reflecting shareholder returns and capital investment, although analysts said this was expected.
Whitbread said it remained confident in its full-year outlook but trimmed guidance for its German business, noted higher food and drink inflation and increased lease costs.
Centrica fared better, up 3.0%, while unchanged guidance was enough to spur specialty chemicals firm Croda, which gained 8.5%.
The Yorkshire-based speciality chemicals maker still expects the more challenging trading environment and low order book visibility to continue for the remainder of the year.
Insurers were a weak feature with Admiral down 2.4%, Phoenix Group down 2.2% and Aviva down 1.6%.
It was another record breaking day for gold which traded at 4,270.73 dollars an ounce on Thursday, up from 4,199.71 on Wednesday.
Brent oil traded at 61.70 dollars a barrel, down from 62.20 late Wednesday, despite comments from the head of Saudi Aramco who warned of a global oil shortage on the horizon.
Amin Nasser, chief executive of the world’s largest oil company by production, called for a return to spending on exploration and production as global demand for oil continued to grow, saying current investment was “extremely low”.
“We had a decade…where people didn’t explore. It’s going to have an impact,” Mr Nasser told the Financial Times. “If it doesn’t happen, there will be a supply crunch.”
The biggest risers on the FTSE 100 were Croda, up 228.0 pence at 2,898.0p, Centrica, up 5.0p at 175.1p, Coca-Cola HBC, up 96.0p at 3,494.0p, Rolls Royce, up 27.5p at 1,140.0p and Spirax, up 155.0p at 6,815.0p.
The biggest fallers on the FTSE 100 were Whitbread, down 331.0p at 2,893.0p, Admiral Group, down 80.0p at 3,248.0p, Pershing Square, down 106.0p at 4,564.0p, Phoenix Group, down 14.5p at 661.0p and Rentokil Initial, down 7.4p at 398.2p.
Contributed by Alliance News.
