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FTSE 100 LIVE: European stocks fall as UK public debt balloons to 100% of GDP

How major markets are performing on Friday

Lucy Harley-McKeown
Updated
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The FTSE 100 and European stocks bucked the global uptrend on Friday, falling following UK public sector data showing debt reached 100% of GDP last month, with debt up £3.3bn from August 2023.

The difference between public sector spending and income was £13.7bn in August, the ONS said, the third highest August borrowing since monthly records began in January 1993.

Public sector net debt excluding public sector banks was provisionally estimated at 100% of GDP; this was 4.3 percentage points more than at the end of August 2023, and remains at levels last seen in the early 1960s.

"When we came into office, we inherited an economy that wasn’t working for working people," said chief secretary to the Treasury Darren Jones. "We are now taking the tough decisions now to fix the foundations of our economy, so we can rebuild Britain and make every part of the country better off."

  • Following the data, the FTSE 100 (^FTSE) was 0.5% lower in early trade.

  • Germany's DAX (^GDAXI) fell 0.7% and the CAC 40 (^FCHI) in Paris declined 0.3%.

  • The pan-European STOXX 600 (^STOXX) moved 0.4% lower.

  • European stocks fell even as indices across the world gained. US stocks have been charged by Wednesday's 50 basis point rate cut by the Federal Reserve.

Live9 updates
  • Lucy Harley-McKeown

    Trending tickers: Investec

    Vicky McKeever writes:

    Investec Group has indicated a robust financial performance for the first half of the year, forecasting pre-provision adjusted operating profit between £520m and £550m, a year-on-year increase of 6.7% to 12.9%, according to a trading update.

    The bank expects adjusted operating pretax profit in the six months to September to be between £450m and £482m, up from £441m in the same period last year.

    Headline earnings per share could be anywhere from 1.4% below last year’s 36.9p to 3.5% ahead. This includes the costs of “executing strategic actions”.

    The group's performance has been driven by strategic initiatives, including its recent combination with Rathbones, which has influenced earnings. However, the firm noted that prior one-off gains have resulted in lower basic earnings per share.

    Despite headwinds in the UK market, Investec highlighted several positive factors, including strong revenue momentum, an improved cost-to-income ratio, and solid credit quality.

    READ MORE

  • Lucy Harley-McKeown

    Despite retail bump, consumer confidence falls

    UK consumer confidence suffered a big fall in September, down seven points compared with the same time last year.

    According to GfK (GFKRF)'s consumer confidence barometer, all measures were down in comparison with last month’s announcement. Key future indicators on personal finances, economy and purchase intentions all came in sharply lower.

    The index measuring changes in personal finances during the last year was down two points at -9, which was nine points better than September 2023. Meanwhile, the forecast for personal finances over the next 12 months is down nine points at -3, which is three points higher than this time last year.

    The measure for the general economic situation of the country during the last year is also down two points at -37. This is 16 points higher than in September 2023.

    READ MORE: UK consumer confidence suffers big fall in September

  • Lucy Harley-McKeown

    'No wriggle room' ahead of Autumn budget

    Matt Swannell, chief economic advisor to the EY ITEM Club, said:

    The government will likely have to increase spending over the next few months, due to a combination of accepting the recommendations for higher pay increases from public sector pay boards and non-labour cost overruns across a range of government departments.

    Beyond this year, the UK's fiscal position will remain stretched. Though the chancellor's multi-year spending review will conclude in spring 2025, she will likely be tempted to put in place more realistic spending totals in the upcoming budget. At this stage, the Autumn budget looks likely to feature a tweak to the fiscal rules, alongside some tax rises beyond those that had been set out during the general election campaign. A material rise in taxes alongside a loss of momentum throughout the economy may prompt the Monetary Policy Committee (MPC) to deliver more interest rate cuts around the turn of the year.

  • Lucy Harley-McKeown

    PwC's view on UK public debt

    Following news UK public debt ballooned to 100% of GDP, Gora Suri, economist at PwC UK said:

    Public spending is not expected to come down in aggregate terms, however, we could see pockets of spending being redirected to areas where needs are more pressing (e.g. healthcare and education).

    One option for Labour is to tinker with the fiscal rules to take some pressure off public finances, particularly the net debt rule which states that debt as a share of GDP should be falling by the end of the forecast horizon. Labour could tweak this rule by altering the definition of net debt (e.g. by excluding Bank of England debt from the calculation) or by changing the number of years it takes to reach that target.

  • Lucy Harley-McKeown

    Asian stocks track Wall Street gains, react to BoJ

    Major Asian indices headed higher on Friday tracking gains on Wall Street after the Federal Reserve's half-point rate cut. The Bank of Japan also decided to keep rates on hold this week, in line with expectations.

    The Nikkei (^N225) rose 1.5%, while the Hang Seng (^HSI) in Hong Kong ticked up 1.2%.

  • Lucy Harley-McKeown

    UK retail sales jump in August

    Yahoo Finance UK reporter Pedro Goncalves writes:

    UK retail sales enjoyed a robust performance in August, with volumes rising by 1%, surpassing economists' forecasts, according to the Office for National Statistics (ONS).

    The latest figures mark a continued recovery, following a 0.7% increase in July, and lift year-on-year sales by 2.5%. This outpaced the City consensus of a 1.4% rise.

    August’s gains were driven by favourable weather conditions, which boosted demand for clothing and supermarket purchases. Textile, clothing, and footwear stores led the charge, posting a 2.9% increase in sales, while food retailers also saw a notable 1.8% rise.

    ONS chief economist Grant Fitzner said: “Retail sales rose in August as warmer weather and end of season promotions helped to boost sales, most notably for clothing and food shops. Supermarkets, in particular, contributed to the largest annual rise for food sales since the summer of 2021."

    READ MORE HERE

  • Lucy Harley-McKeown

    How US stocks are faring in premarket

  • Lucy Harley-McKeown

    Overnight in the US: Dow hits 42k

    From our US colleagues:

    US stocks soared, with the Dow Jones Industrial Average (^DJI) closing above the 42,000 level for the first time amid growing optimism that the Federal Reserve's jumbo interest rate cut will deliver a "soft landing" for the US economy.

    The S&P 500 (^GSPC) climbed roughly 1.7%, while the Dow rose more than 1.2%, with both indexes trading at record highs. The tech-heavy Nasdaq Composite (^IXIC) led the gains, up roughly 2.5%.

    Stocks rallied as investors took a closer look at the Fed's decision to kick-start its new rate cycle with a 50 basis point cut. After Wednesday's policy announcement, the gauges swayed before closing lower.

    Wall Street has absorbed Fed Chair Jerome Powell's message that a deep cut in a relatively strong economy will ultimately fend off the risk of recession — and is a sign of faith, not panic about current conditions.

    Bank of America now believes the Fed will go on to cut rates by 0.75% by the end of the year, versus the 0.50% it previously forecast. By comparison, the central bank's own "dot plot" indicates policymakers expect a half-percentage-point reduction.

  • Lucy Harley-McKeown

    Good morning!

    Hello from London — happy Friday! We made it through a 50 basis point interest rate cut by the Federal Reserve and now, this morning, retail sales data in the UK.

    Also today:

    • The GfK consumer confidence barometer

    • A release by the Office for Budget Responsibility

    • Fitch Ratings sovereign review.

    Let's get to it.

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