FTSE lower at close after US economy shrinks again

The FTSE slid into the red on Thursday after the US economy shrank again and ratcheted up fears of a global recession.

Gross domestic products (GDP) declined by 0.9% in the second quarter of 2022, the commerce department confirmed, after a 0.2% drop in the previous quarter.

Traders had started the session on a high after the Federal Reserve lifted interest rates by 0.75 points again overnight but positive sentiment soon drifted away in London and the US.

Joshua Mahony, senior market analyst at IG, said: “Despite many expecting to see today’s GDP data signal a contraction of the US economy in Q2, we have seen the dollar and stocks both move lower in response this afternoon.

“Clearly, the boost provided by Jerome Powell yesterday has been fleeting, despite his inference that future hikes will be data driven.”

The FTSE 100 ended the day down 2.98 points, or 0.04%, at 7,345.25.

It came amid a bumper session for UK corporate updates, with significant focus on oil giant Shell and British Gas owner Centrica as they both revealed soaring profits as millions of Britons face the prospect of fuel poverty within the next year.

Shell shares rose by 6.5p to 2,124p after the oil major posted record earnings of nearly 11.5 billion dollars (£9.5 billion) for the second quarter of the year and committed to handing billions of dollars back to shareholders.

Centrica meanwhile slipped in value, dipping by 2.14p to 88.84p, despite the group revealing that profits soared five-fold to £1.3 billion and that it would start paying dividends to shareholders due to the surge in prices.

Michael Hewson, chief market analyst at CMC Markets UK, said the index “underperformed” as it was weighed down by healthcare, telecoms and banks”.

Elsewhere in Europe, traders remained more positive as they continued to focus on the Central Bank’s action to thwart inflation.

The German Dax increased 0.88% by the end of the session while the French Cac improved by 1.3%.

Meanwhile, the pound was down 0.12% against the dollar at 1.211 and was 0.09% lower against the euro at 1.193 at the close.

In UK company news, BT Group was among the day’s weaker performers despite its first sales increase in five years, on the back of customer price increases.

Earnings were also in line with expectations but shares closed 14.25p lower at 161.85p after the firm reported that earnings for its enterprise business fell by more than a quarter over the past three months.

Gordon’s gin maker Diageo’s latest update proved a tonic for investors, after sales bounced 21.4% on the back of strong demand for luxury spirits.

It finished the session 99p higher at 3,865p as profits met the top of analyst forecasts.

The price of oil had another lift after Wednesday’s confirmation of higher than predicted oil inventories.

Brent crude oil increased by 1.02% to 107.71 US dollars per barrel when the London markets closed.

The biggest risers in the FTSE 100 were Fresnillo, up 42.4p at  697.8p, Schroders, up 168p at 2,898p, Ashtead, up 252p at 4,397p, Rentokil, up 29.2p at 532p, and Smurfit Kappa, up 153p at 3,003p.

The biggest fallers of the day were Smith & Nephew, down 137p at 1,067.5p, BT, down 14.25p at 161.85p, Airtel Africa, down 12.6p at 158.3p, Barclays, down 7.32p at 150.34p, and Aveva, down 99p at 2,231p.