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FTSE bounces as traders shrug off confirmation of recession

The FTSE 100 closed 125.78 points higher at 6,280.12 at the end of trading on Wednesday.

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(Kirsty O’Connor/PA)

(Kirsty O’Connor/PA)

(Kirsty O’Connor/PA)

Traders have shrugged off confirmation that the UK economy dived into its largest recession on record as fresh vaccine hopes lifted the FTSE.

The Office for National Statistics said GDP contracted by 20.4% in the quarter to June, but this was marginally better than economists had predicted.

It also said the economy grew by 8.7% in June to help drive some cautious optimism regarding the pace of the rebound.

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(PA Graphics)

(PA Graphics)

Press Association Images

(PA Graphics)

The FTSE 100 closed 125.78 points higher at 6,280.12 at the end of trading on Wednesday.

Connor Campbell, financial analyst at Spreadex, said: “You wouldn’t think the FTSE had just been dealt the UK’s worst GDP reading on record, officially plunging the country back into a recession 11 years after the financial crisis.

“The UK index outstripped its peers and then some on Wednesday. That’s the FTSE’s best price for over three weeks and leaves it less than 100 points off a fresh two-month peak.”

News that the US has bought 100 million doses of Moderna’s potential Covid-19 treatment for 1.5 billion dollars (£1.1 billion) helped to lift spirits, while speculation over Russia’s reported vaccine continued.

Across Europe, the other major markets were slightly less positive. The German Dax was weighed down slightly by an under-performance by the country’s technology sector, and increased by 0.91%, while the French Cac moved 0.97% higher.

In the US, the Dow Jones bounced back strongly amid wider optimism as it shrugged off late concerns from Tuesday over the prospects of the US stimulus deal.

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(PA Graphics)

(PA Graphics)

Press Association Images

(PA Graphics)

The value of the pound was particularly impacted by confirmation of the UK’s heavy recession, slumping against a dollar which was weak itself.

The pound fell 0.01% versus the US dollar at 1.304 and was down 0.48% against the euro at 1.106.

Oil and gas stocks were among the best performers on Wednesday on the back of optimism over future demand.

In company news, online fashion giant Asos soared after it beat market expectations following a boost from a reduction in customer returns.

It said profit before tax is now likely to be between £130 million and £150 million for the full year, up from £33.1 million the year before.

Shares in Asos improved by 560p to 4,780p.

Just Eat Takeaway closed higher after customer numbers grew in the first half of the year, as the coronavirus lockdown stoked demand.

It said it also added a record number of restaurants to its platforms, as shares rose by 320p to 8,998p.

Cybersecurity firm Avast finished 18p down at 582p after profits for the first half of the year fell 16.9%, despite an increase in revenues.

The price of oil nudged higher despite Opec cutting demand forecasts for 2020, as broad positive sentiment kept it in the black.

The price of a barrel of Brent crude oil increased by 0.2% to 45.26 US dollars.

The biggest risers on the FTSE 100 were Admiral, up 183p at 2,708p, Severn Trent, up 124p at 2,589p, Pennon Group, up 51.5p at 1,100p, and United Utilities, up 41.6p at 932.8p.

The biggest fallers were Avast, down 18p at 582p, IAG, down 5.4p at 213.3p, Whitbread, down 53p at 2,520p, and Land Securities, down 11.8p at 573.8p.

PA