FTSE 100 rises on Next boost; recession worries loom

LONDON: The exporter-heavy FTSE 100 rose on Thursday as retailer Next rallied following its annual profit forecast, offsetting the impact from data showing contraction in UK business activity and indicating the economy could already be in recession.

The blue-chip FTSE 100 climbed 0.4%, extending gains to a third straight session and outperforming most regional peers. The domestically focused FTSE 250 midcap index also gained 0.5%. British clothing retailer Next surged 7.4% after raising its pretax profit forecast for the current year, pushing the broader retailers index to a more than four-month high.

Oil majors BP and Shell rose more than 1% each as crude oil prices rebounded amid dollar weakness. Britain's services sector ended 2022 in a lacklustre fashion, with new orders falling and hiring frozen during December, a survey showed, highlighting the likelihood that Britain is already in recession.

"Our expectation is that in comparison to previous downturns, it is not going to be as severe, as the pandemic and impacted recession of 2020-2021," said Jeremy Batstone-Carr, European strategist at Raymond James. "It will be fairly shallow, with a marked revival beginning to emerge towards the back end of this year."

Adding to the gloom were the minutes from the Federal Reserve's December meeting that dimmed hopes for a sooner-than-expected reduction in interest rates. Among individual stocks, Prudential shed 1.7% after Exane BNP Paribas downgraded the insurer to "underperform".

Asia-exposed investment bank HSBC rose 2.0% to a four-month high after China said it would reopen the border with Hong Kong on Jan. 8.