Week ahead: City eyes new economy figures and Bank governor Bailey comments
The City will turn its gaze to fresh GDP figures published this week for signs that the UK is already in the teeth of a recession in a busy week of data announcements.
London’s premier FTSE 100 index shook off the turmoil in Downing Street to climb 0.38 per cent and finish the week at 7,196.24 points.
The domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, jumped 1.48 per cent to end the week at 18,912.95 points.
Traders were seemingly mute to ex-prime minister Boris Johnson bowing to days of pressure and resigning.
They are instead more worried about the UK economy being thrown into reverse by rampant inflation cooling spending and higher interest rates weighing on households and businesses.
New GDP data published on Wednesday may spark a downward spiral on the City’s main indexes if it shows the economy contracted in May.
Analysts expect output to have flatlined in the month.
Sanjay Raja, senior economist at Deutsche Bank, thinks output jumped 0.1 per cent in May. But, the economy “will [have been] weighed by weaker sentiment, deteriorating export orders, and lower household consumption (particularly for services), as real incomes continue to get squeezed from the unfolding cost of living crisis”.
Further hawkish signals from Bank of England governor Andrew Bailey in a treasury select committee grilling tomorrow are likely to dial up expectations for a 50 basis point rise at the central bank’s next meeting on 4 August.
“Bottom line: the need for speed is clear,” Raja said. Inflation is running at a 40-year high of 9.1 per cent, but is expected to top 11 per cent in October, more than five times the Bank’s two per cent target.
The Bank has raised rates at each of its last five meetings, taking them to a 13-year high of 1.25 per cent.
On the corporate front, BT’s c-suite at an AGM on Thursday are likely to face pressure on staff pay after workers earlier this month backed strike action.