Britain’s FTSE 100 edged down 0.1% on Friday following a surprise contraction in the country’s gross domestic product (GDP) for October.
Despite the decline, the FTSE 100 marked its fourth consecutive weekly gain, while the midcap FTSE 250 fell 0.3%, logging its first weekly loss in four weeks with a 0.5% decline.
The UK economy contracted for the second consecutive month in October, marking the first back-to-back declines in output since the early stages of the COVID-19 pandemic in 2020.
GDP shrank by 0.1% month-on-month in October, mirroring September’s contraction.
Economists polled by Reuters had anticipated a 0.1% monthly expansion.
Finance Minister Rachel Reeves’ budget statement on Oct. 30, which introduced significant tax increases on businesses, will impact GDP data starting from November.
The pound weakened against the U.S. dollar after the GDP figures revealed stagnation in growth.
While the Bank of England is expected to hold interest rates steady at its upcoming policy meeting, the data may increase expectations of quicker rate cuts in 2024.
Investors are also keeping an eye on a potential rate cut from the U.S. Federal Reserve.
In positive news for Finance Minister Reeves, British consumer morale rose to a four-month high in December as households became more optimistic about their finances.
This follows a budget-related slump in business sentiment highlighted by other indicators.
Meanwhile, precious metal miners led sectoral losses, falling 3.1%, and industrial miners dropped 2%, pressured by weaker copper prices linked to a stronger U.S. dollar.
Conversely, UK beverage stocks led sectoral gains, rising 2.1%.
Spirit maker Diageo extended its previous session’s rally, adding 2.3%.
On the downside, Endeavour Mining dropped 3%, extending its losses and ranking as the weakest performer in the FTSE 100.