Strong week ends with prolonged recession alert as stocks slip back

International stocks yesterday fell back from Thursday’s highs amid the UK economy shrinking and fears of a looming prolonged recession.

The FTSE 100 started on a good footing, but slipped into the red as the week drew to a close.

It was down 0.78%, or 57.3 points, to finish on 7,318.04 points.

It came as official figures showed the UK economy shrank by 0.2% between July and September – meaning that if it sinks further this year, the nation will have entered a recession.

Experts warn that it could be the longest recession in a century, lasting for two years.

But the figures were not a big shock to the markets, which had priced in a decline, while optimism from Thursday’s promising US inflation reading lingered.

Reports that China was easing some of its Covid restrictions also provided fresh hope to investors at home and overseas.

Michael Hewson, chief market analyst at CMC Markets UK, said: “The FTSE 100 has found itself slipping back with the more defensive areas of the market coming under pressure.

“Nonetheless it’s still been a strong week for markets, with the German Dax closing higher for the sixth week in a row.

“It’s hard to escape the feeling that once again markets appear to be getting slightly ahead of themselves, given that the quarantine time in China is still quite long and that Covid infection rates are rising and not decreasing.”

The German Dax closed 0.56% higher, while the French Cac was up 0.58%.

The pound enjoyed a rebound in the second half of the week, hitting well above $1.17 and a sixweek high yesterday.

In company news, arts and crafts retailer The Works saw its shares slide 5.5% despite posting stronger sales and assuring investors that shoppers will want to celebrate Christmas in a “more affordable way”.

Housebuilder Redrow announced it was buying less land and the value of private reservations was down on last year.

The firm said that financial instability had rocked the housing market and that the business has had to adapt. Its shares fell by 0.38%.

“Markets appear to be getting slightly ahead of themselves