The FTSE 100 experienced a modest rise on Thursday, gaining 30.41 points or 0.3%, to close at 10,589.99. This positive movement was driven by unexpectedly robust growth figures from the UK economy, strong trading updates from major companies, and record highs on Wall Street.
UK Economic Growth Surprises Analysts
In a welcome surprise, the UK’s economic growth accelerated in February, outpacing expectations thanks to a strong performance in the services and production sectors. Monthly GDP rose by 0.5%, following a revised increase of 0.1% in January, which had previously indicated stagnation. The February figures notably surpassed the consensus forecast of just 0.1%.
Sanjay Raja, Deutsche Bank’s chief UK economist, highlighted that this growth suggests the UK entered the recent energy crisis on a more stable footing than anticipated. However, Raja cautioned against overly optimistic projections, indicating that households are likely already feeling the financial pinch due to rising costs stemming from the ongoing Middle East energy crisis. Fuel prices have surged over 20% since the onset of the crisis, while dual fuel bills are expected to follow suit this summer.
Bank of England’s Cautious Stance
The positive economic indicators coincided with comments from Bank of England Governor Andrew Bailey, who stated that the central bank would not hastily increase interest rates in response to the energy situation. Speaking at the International Monetary Fund’s spring meeting in Washington DC, Bailey noted the complexities involved in assessing the impact of the crisis on the UK economy. He underscored the need for careful consideration before making any decisions regarding interest rates, given the current uncertainties.
In European markets, the French Cac 40 remained stable, while Germany’s Dax 40 saw a modest increase of 0.4%. Meanwhile, US markets also showed gains, with the Dow Jones up 0.1%, the S&P 500 climbing 0.3%, and the Nasdaq Composite rising by 0.4%, with all three indices reaching new record levels thanks to optimism surrounding potential breakthroughs in US-Iran negotiations.
Corporate Highlights: Tesco and Intertek Lead the Way
Among the day’s notable stock movements, Intertek surged by 9% after rejecting a bid of 5,150 pence per share from EQT Fund Management. The company deemed the offer, which would value it at approximately £8 billion, as undervaluing its future prospects. Earlier in the week, Intertek had announced a strategic review and was considering the sale of its Energy & Infrastructure division, prompting a significant rise in its share price.
Tesco also had a strong showing, climbing 4.7% following an annual profit report that exceeded expectations. The supermarket giant reported a pre-tax profit of £2.4 billion for the year ending February 28, an increase of 8.5% from the previous year. Its adjusted operating profit also slightly surpassed forecasts, leading Shore Capital analyst Clive Black to praise Tesco’s operational performance.
In contrast, easyJet saw a decline of 5% after predicting a larger-than-expected loss due to rising fuel costs, signalling the ongoing challenges facing the airline industry.
Market Reactions to Global Events
As the day progressed, Brent crude oil prices continued to rise, trading at $98.39 per barrel, up from $95.40 during the previous day’s close. This increase comes amid ongoing tensions, with US Defence Secretary Pete Hegseth announcing plans for a blockade of Iranian ports, which he claimed would remain in place until a satisfactory deal is reached.
The financial landscape was further complicated by fluctuations in currency markets, with the pound slipping against both the dollar and the euro.
Why it Matters
The upward movement of the FTSE 100, alongside positive economic growth data, reflects a cautiously optimistic outlook for the UK economy amidst global uncertainties. While the immediate financial results from companies like Tesco and Intertek provide a sense of stability, the looming energy crisis and rising costs could challenge consumers and businesses alike in the coming months. Investors will need to navigate this complex landscape carefully as they consider future market opportunities.
