FTSE 100 slips while pound stumbles as IMF warns of contraction

LONDON’s FTSE 100 dipped and the pound stumbled yesterday, both driven lower by the International Monetary Fund (IMF) warning the UK is on course to be the only major economy to contract this year.

The capital’s premier index fell 0.17 per cent to 7,771.69 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, shed 0.46 per cent to drop to 19,845.72 points.

The pound weakened nearly 0.3 per cent against the US dollar off the back of the IMF’s dire economic warning. Sterling also slipped nearly 0.4 per cent against the euro.

Late last night, the IMF published fresh forecasts in which it predicted Britain’s economy will shrink 0.6 per cent this year, making it the only G7 country to be hit by a contraction in 2023.

Rapidly rising interest rates, compounded by high inflation and tax rises will choke economic growth, the IMF said. That warning depressed market sentiment in the City, forcing the FTSE 100 index lower.

Banks led the premier index into the red due to investors focusing on rising default risks amid the economic slump instead of the boost from higher interest rates.

High street lenders HSBC and Barclays dropped nearly one per cent and around half a per cent respectively, while Asia-focused bank Standard Chartered was trading near the bottom of the FTSE 100. Online supermarket and middle class favourite Ocado was the worst performer, losing 4.75 per cent. The firm’s shares have been volatile this year.

Pets at Home has seen its like-for-like growth spike in the third quarter, boosting full-year expectations. This included a 7.6 per cent growth in its retail sector, with management pleased to see growth in all categories. The headline results certainly impressed Peel Hunt, which has set a buy stance with a target price of 400p per share. It said: “We are big fans of the space and of the strategy here.”

Serica Energy confirmed it has received shareholder support for the proposed acquisition of Tailwind Energy. The company had a mature declining production profile –however, the pro forma business including Tailwind’s assets is set to deliver multi-year visibility on production growth to over 45m barrels of oil per day. Peel Hunt is maintaining a buy stance with a target price of 437p per share.