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The FTSE 100 experienced a notable uptick on Thursday, closing up 30.41 points, or 0.3%, reaching 10,589.99. This positive momentum was fuelled by unexpectedly robust growth figures from the UK economy, alongside encouraging trading results from major companies like Tesco. As markets responded to a mix of local and international developments, the outlook remains cautiously optimistic.
UK Economic Growth Surprises Analysts
UK GDP data released for February revealed a 0.5% increase, significantly outpacing the expected 0.1% growth. This follows a revision in January’s figures, which now show a slight rise instead of stagnation. The upbeat data suggests that the UK entered the recent energy crisis with a stronger economic footing than many analysts had anticipated.
Sanjay Raja, Deutsche Bank’s chief UK economist, described the figures as having “smashed expectations.” However, he cautioned that this upward momentum may not be sustainable. “Households are already feeling the pinch from rising energy prices, which have surged over 20% since the onset of the Iran crisis,” he noted. He anticipates a slowdown in growth as consumers grapple with increasing living costs.
Tesco Drives Market Confidence
Tesco, the retail giant, was a key player in bolstering market confidence, its shares climbing by 4.7% after reporting annual profits that surpassed forecasts. The supermarket chain announced a pre-tax profit of £2.4 billion for the year ending February 28, an 8.5% rise from the previous year, along with an upward revision of its free cash flow guidance. Analyst Clive Black from Shore Capital praised Tesco’s performance, stating it reflected “outstanding operational execution.”
This positive news from Tesco comes at a crucial time as the retail sector faces pressures from rising costs and changing consumer habits. The strong performance not only reassured investors but also contributed to the overall rise in the FTSE 100.
Wall Street and Global Markets React
Across the Atlantic, US markets also posted gains, with the Dow Jones Industrial Average rising by 0.1% and the S&P 500 increasing by 0.3%. Both indices reached new record highs, driven by optimism surrounding US-Iran negotiations, although analysts warn that the rally may not reflect underlying economic realities.
In Europe, the DAX 40 nudged up by 0.4%, while the CAC 40 remained relatively flat. As global oil prices resumed their upward trend, Brent crude was trading at $98.39 per barrel on Thursday afternoon, a slight increase from Wednesday’s closing figures. This rise in oil prices, driven by ongoing geopolitical tensions, poses risks for economic recovery as consumers face higher fuel costs.
Corporate Highlights and Market Movements
On the FTSE 100, Intertek emerged as a standout, surging 9% after rejecting an unsolicited bid from EQT Fund Management, which valued the company at around £8 billion. Intertek deemed the offer “fundamentally undervalued,” sparking a rally in its stock price.
Ladbrokes owner Entain also saw its shares increase by 6% after reporting strong revenue growth in its UK and Australian segments, which exceeded market expectations. Conversely, easyJet faced a setback, with shares dropping by 5% after the airline warned of a larger-than-anticipated loss due to rising fuel costs.
Meanwhile, Morgan Sindall raised its profit forecast for 2026 for the second time in three months, leading to a 7.5% surge in its shares, while Animalcare Group’s stock jumped 35% following a £235.2 million takeover offer from Charterhouse Capital Partners.
Why it Matters
The positive performance of the FTSE 100, driven by strong corporate earnings and unexpected economic growth, signifies resilience in the face of ongoing challenges. As households brace for impending financial pressures from rising energy costs, the ability of companies like Tesco to outperform expectations could be pivotal for maintaining consumer confidence. The market’s reaction highlights the interconnectedness of global economic factors and the importance of corporate performance in shaping market dynamics. Investors will need to remain vigilant as they navigate this evolving landscape, balancing optimism with the realities of rising costs and geopolitical instability.
