FTSE 100 Climbs Amid Economic Contraction: Key Developments and Market Reactions

The UK's FTSE 100 slightly increased amid an unexpected contraction in the country's GDP in October. The weaker pound benefitted exporters, while Britain's economy shrunk unexpectedly. The Bank of England is expected to hold rates, and consumer morale improved in December. The beverage sector saw gains, while mining dipped.

The UK's leading blue-chip index, FTSE 100, saw a modest increase of 0.1% on Friday, bolstered by a weaker pound following surprising GDP contraction data. This currency fluctuation supported exporters, while the midcap FTSE 250 rose 0.2% but faced its first weekly loss in four.

In an unforeseen economic turn, Britain experienced its second consecutive month of economic shrinkage in October, raising questions ahead of the new government's budget. Economists had predicted a growth of 0.1%. October's budget statement resulted in significant tax hikes expected to reflect in November's GDP data.

Investment director at AJ Bell, Russ Mould, stated that the contraction is not surprising for a forward-looking market. Meanwhile, consumer morale recovered to a four-month high in December, potentially easing concerns for Rachel Reeves as businesses showed a dip in sentiment post-budget.

(With inputs from agencies.)