FTSE 100 is gaining ground even if the recovery engine collapses

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“UK GDP data shows that the engine of the recovery is still floundering, with the economy only advancing on its way to full health. Although the September output reading was a few notches above the forecast at 0.6%, a deterioration in growth over the summer showed how difficult the economy is to regain its level of output. before the pandemic. The gloomy situation comes against the backdrop of relaxing social distancing regulations, offering new indications that many companies have been grappling with the current supply chain crisis and labor shortages. ‘artwork. Nonetheless, the FTSE 100 and FTSE 250 gained ground despite the negative reading, with the expectation that the Bank of England is more likely to delay a sharp tightening of monetary policy in the months to come. There is no easy-to-follow manual for making the additional repairs needed for the economy and the Bank of England has so far refused to change interest rates, due to concerns that could damage further the pistons of the recovery. The big worry is that with rising energy costs, benefit cuts, and further price hikes to come, consumers are already starting to feel the effects and may become cautious in their spending habits.

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Mining stocks are among the biggest gainers to date on the FTSE 100 amid higher inflation around the world, in part indicating an increase in global demand for goods. Auto Trader topped the FTSE 100 rankings as revenue grew 82% in the first half. The demand for used cars has skyrocketed, amid supply chain shortages affecting new models, turning online advertising on the forecourt into an even bigger cash cow. The company’s best six-month results pushed the stock price up more than 11% at the start of trading.

Investors will also take a look at the trade figures today and what they mean for the UK economy. The transition to a new era of trade after Brexit still hurts with the trade deficit widening from £ 3.5bn to £ 4.3bn in the third quarter. This was propelled by rising imports but falling exports, especially to non-EU countries. There had been high hopes that the UK would find profitable new business friends around the world, but those relationships have clearly been more difficult to nurture.

The data indicates that the big rebound in the recovery appears to be behind the UK, and the coming months will likely be an upward struggle to regain pre-pandemic levels as businesses and consumers are caught between higher prices and higher taxes. , which could limit the rise in interest rates next year. “

Article by Susannah Streeter, Senior Investment and Markets Analyst, Hargreaves Lansdown


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