Santa rally replaced by ‘Grinch sell-off’ as European and US stocks tumble

The Santa rally that gave European and US markets a boost on Wednesday has been replaced by a “Grinch sell-off” after the UK’s economy contracted more than expected and losses for investment stocks dragged on the FTSE 100.

Figures from the Office for National Statistics (ONS) revealed that gross domestic product in the UK fell by 0.3% in the third quarter of 2022, against the 0.2% decline initially estimated.

The official figures reinforced the expectation that Britain is heading for recession, and preceded what analysts described as a “Grinch sell-off” in the markets.

Across the pond, Americans filing claims for state unemployment benefits rose by 2,000 over the last week to 216,000.

However, jobless claims still remain at historically low levels amid a continuing tight labour market, analysts said.

The FTSE 100 moved lover as investment firms Abrdn, Scottish Mortgage Investment Trust, Hargreaves Lansdown and Schroders all saw their share prices dip by more than 1.5%, offsetting gains for health giants on London’s leading index.

It closed down 28.04 points, or 0.37%, to 7,469.28, despite moving higher earlier on in the day.

Meanwhile, the pound also dipped by 0.4% against the US dollar, leaving it just about floating above the 1.2 mark at 1.2034 US dollars.

Joshua Mahony, senior market analyst at online trading platform IG, said: “The bears are back in charge today, as UK GDP data provided yet another warning that we may already be in a recession.

“For those not in the know, the outperformance of the FTSE 100 would signal relative strength for UK publicly listed companies.

“However, despite the FTSE 100 being the only major western index to have avoided significant losses in 2022, the UK has suffered the worst Q3 growth of any G7 nation.”

Elsewhere in Europe, the German Dax suffered much heavier losses, almost reversing the gains it boasted on Wednesday. It closed 1.3% lower.

The French Cac was also firmly in the red, sinking 0.95%.

The gloomy sentiment was reflected in the US, with the S&P 500 plunging by nearly 2% and Dow Jones dropping by 1.52% when European markets closed.

In company news, shares in fashion chain Superdry jumped higher after the group revealed higher sales for the past six months, driven by a strong performance in its high-street stores.

The company also told investors that it had secured an £80 million refinancing for the next three years, replacing an existing scheme due to end in January.

Shares in Superdry were up by 16.6% when markets closed.

On the other hand, toy designer Character Group warned of slowing sales in the run-up to Christmas as trading has been more challenging this year.

It reported largely flat underlying annual profits which edged up by just £200,000 in the year to August 31.

Shares in the group were up by 1.9% despite the warning.

Payments and lending firm TruFin said it had rejected a £26 million takeover bid from an unnamed buyer to acquire its Oxygen Finance subsidiary.

The announcement sent its shares higher on Thursday as TruFin told investors the offer “undervalues the business and the prospects of Oxygen”.

Its share price was 7.1% higher when markets closed.

The biggest risers on the FTSE 100 were Haleon, up 3.2p to 323.9p, Pearson, up 7.2p to 945.6p, BT Group, up 0.85p to 114.35p, Compass Group, up 13.5p to 1,934p, and Beazley, up 4.5p to 677p.

The biggest fallers on the FTSE 100 were Ocado Group, down 22.4p to 629.2p, United Utilities Group, down 27.8p to 990.2p, Abrdn, down 5.1p to 185.95p, Halma, down 53.5p to 1,994.5p, and Weir Group, down 38.5p to 1,668.5p.