Pound enjoys surge despite figures indicating downturn will worsen

The pound enjoyed a late afternoon surge, despite fresh figures indicating the UK is in the middle of a recession.

Sterling jumped by more than 1.25% to top 1.2 US dollars by the time European markets had closed, for the first time since mid-august.

The pound also made solid gains against the euro, rising 0.7% to 1.1616.

The influential PMI survey showed the UK’S private sector economy is set to shrink again this month, indicating the country is in the middle of a recession – and the downturn will worsen.

In the US, business activity contracted for the fifth consecutive month as Americans face increasing borrowing costs.

But the FTSE 100 managed to stay in the green after reaching a two-month high on Tuesday, and grazed the 7,500 mark during the highs of the day.

It closed 12.4 points higher (0.17%) at 7,465.24.

In company news, shares in Reach initially dropped sharply after a potential bidder said it was no longer interested in a takeover offer. But shares later recovered and ended the day up 3.3%.

National World, the company behind the Scotsman and Yorkshire Post, said it would not bid for Reach, which owns the Mirror and Express, among others.

Meanwhile, retailer Pets at Home said its profits had dropped by 9.3% before tax in the first six months of the financial year to a little under £60 million. Shares dropped 4.7% on the news.

The business said that it had invested heavily in its digital channels, which had increased costs significantly.

Halfords saw its revenue rise 10% in the six months to the end of September but pre-tax profit halved to £29 million as it was once more forced to pay business rates as usual.

The retailer said that its sales of bikes had plummeted by more than 12% – largely as a result of high sales the year before.

Shares dropped by 6.5% on the news.

Biggest risers on the FTSE 100 were Hargreaves Lansdown, up 36.6p to 845p; Ocado, up 26.4p to 657.6p; Frasers, up 34p to 886p; Intermediate Capital Group, up 45p to 1,202p; and Rolls-royce, up 3.12p to 88.41p.

“Economy is set to shrink again this month