FTSE 100 lags despite surprise UK GDP boost

UK manages to avoid negative Q2 growth

“The FTSE 100 is lagging on a day that has once again shone the limelight on the UK a week on from the chancellors highly contentious mini-budget. Soaring mortgage offers have grabbed the headlines, with lenders reacting to recent market turmoil by hiking their borrowing rates in anticipation of greater instability and a reactive Bank of England. Nonetheless, we have seen homebuilders enjoy a relatively upbeat session, with the OBR now expected to provide their initial budget forecasts on 7 October. The Truss/Kwarteng double act will be back in the limelight this coming weekend as the Conservative Party Conference kicks off on Sunday, but there are precious few signals that the controversial tax hike for top earners will be withdrawn. From a market perspective, the pound has managed to recoup the entirety of the budget sell-off against the euro and dollar, but the gilt markets tell us another story. Fortunately, the surprise 0.2% GDP reading for Q2 helped alleviate fears that the UK was in recession as claimed by the Bank of England, but pressures are sure to ramp up as we move towards a difficult second half of the year.”

Eurozone inflation hits double figures

“In a week that has focused in on UK woes, the latest inflation readings out of the eurozone highlighted the battle that if being faced across the entire continent. 10% inflation across the eurozone pushes the ECB to continue hiking to drive down consumption, while the 17.1% figure out of the Netherlands serves to highlight just how difficult the task is to create monetary policy that is appropriate for 19 states. With Russia annexing regions of Ukraine, and the Nord Stream pipelines out of action, European inflation will likely remain elevated as they pay a premium to import energy from further afield. “