European stocks rise and US mixed as UK recession brings hopes of rate cuts

Well that's all from us today, thanks for following along. Be sure to join again tomorrow when we'll be back for more.

As a quick recap, our top story of the day was: UK falls into recession as economy stagnates with shrinking GDP

If you want to know more, check out: What is a recession and why is the UK in one?

Have a good evening folks!

NIESR have predicted that the UK economy will return to growth in the current quarter.

The economic forecasting institute said GDP will rise by 0.2% in the period from January to March.

Paula Bejarano Carbo, NIESR economist, said:

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Christine Lagarde has issued a warning against cutting interest rates before policymakers are confident that the battle against inflation has been won.

The European Central Bank (ECB) chief cautioned that there was a risk that inflation could rise again, as workers are still receiving large pay rises.

She said:

Pay rises are an “increasingly important driver of inflation dynamics”, she warned.

Retail sales in the US declined 0.8% in January, more than the 0.2% fall expected.

This indicates a possible weakening in consumer demand in the world’s largest economy amid high interest rates.

It was the biggest monthly drop since March 2023.

Bitcoin surpassed the $52,000 mark on Thursday, propelled by increased allocations from fund managers like BlackRock (BLK) and Franklin Templeton (BEN) into multiple exchange-traded funds (ETFs).

Bitcoin (BTC-USD) stood at $51,990 (£41,420) at the time of writing, an increase of almost 4% — a level not seen since December 2021.

The market capitalisation of bitcoin rose above the psychologically noteworthy $1tn mark, according to data from CoinGecko.

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Investors are now anticipating bitcoins's halving event, expected to occur in April, which will decrease the issuance of new bitcoin by 50%.

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Centrica (CNA.L) revealed on Thursday that annual profits at British Gas leapt from £72m to £751m in the space of a year — soaring nearly tenfold.

The earnings increase comes after the regulator Ofgem hiked the energy price cap and allowed the company to recoup some of the costs of having to sell energy below wholesale price to its 10 million customers during the energy crisis.

Suppliers were forced to protect households from a spike in prices, which rose as a result of the Covid-19 lockdowns and Russia’s invasion of Ukraine, causing dozens of companies to fail.

As a whole, Centrica’s pre-tax profit climber to £6.5bn last year, compared with a loss of £240m in 2022. But allowing for bespoke adjustments, the company said profits fell 17% to £2.8bn for the year to December.

It also announced another £144m payout to shareholders. The final dividend brings Centrica’s one-off payouts to investors to £217m this year.

The group said it was also voluntarily putting aside £40m to support customers, on top of the £100m spent in 2023.

After the release, chancellor Jeremy Hunt pinned recession blame on high interest rates, which currently stand at a 16-year high of 5.25%.

He said: “High inflation is the single biggest barrier to growth which is why halving it has been our top priority. While interest rates are high — so the Bank of England can bring inflation down — low growth is not a surprise.

“But there are signs the British economy is turning a corner; forecasters agree that growth will strengthen over the next few years, wages are rising faster than prices, mortgage rates are down and unemployment remains low. Although times are still tough for many families, we must stick to the plan — cutting taxes on work and business to build a stronger economy.”

Today's figures suggest that the Bank of England (BoE) may delay cutting UK interest rates until the summer.

On the back of the news, money markets have increased their bets of an interest rate cut from Threadneedle Street, pricing in around 78 basis points of cuts this year. This is equivalent to more than three quarter of a point rate cuts, compared with about 70 bps before the ONS figures.

Analysts at Nomura said:

Well the big news from today is that the UK economy fell into a recession at the end of 2023...

According to the latest data from the Office for National Statistics (ONS) on Thursday, gross domestic product (GDP) for October to December dropped to 0.3%, which was a sharper decline than economists were expecting, and the second quarterly fall in a row.

The economy was pushed into reverse thanks to higher inflation and interest rates hitting consumers' spending. However, all major sectors contracted during the period.

It comes after a decrease of 0.1% in the previous quarter, between July and September 2023. A technical recession is defined as two consecutive falls in GDP.

Across the whole year, in 2023 GDP was estimated to have increased by 0.1% compared with 2022, while on a monthly basis, Britain ended the year with a 0.1% decline in December.

Liz McKewown, ONS director of economic statistics, said:

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