LONDON: UK’s export-oriented FTSE 100 fell on Friday, hurt by a stronger sterling after data showed a smaller-than-expected contraction in Britain’s economy, although midcap stocks marked their best week in almost two years.

Economic output shrank by 0.2% in the third quarter, less than the 0.5% contraction economists had forecast in a Reuters poll, official data showed, marking the start of what is likely to be a lengthy recession.

However, the better-than-expected numbers lifted the pound , which in turn weighed on shares of dollar-earners such as AstraZeneca, GSK and British American Tobacco .

The blue-chip FTSE 100 slipped 0.8% and snapped a three-week winning run.

“Expectation will now build that the UK will have achieved the unwanted technical definition of recession, with a second consecutive quarterly period of negative growth, by the end of the year,” said AJ Bell investment director Russ Mould.

“The market has largely priced in such a prospect. Though the news doesn’t make balancing the books any easier for Chancellor Jeremy Hunt ahead of his Autumn Statement given the implied drop in tax revenue.” However, the mid-cap FTSE 250 jumped 1.2% and notched its biggest weekly gain in almost two years, driven by bets of smaller interest rate hikes by the Federal Reserve after signs of cooling US inflation.

Miners and energy shares climbed 0.4% and 1.9%, respectively, as commodity prices jumped on hopes of demand recovery after the world’s largest consumer eased some COVID-19 measures.

Asia-focussed insurer Prudential jumped 7.6%, while China-exposed luxury goods maker Burberry gained almost 2%.

Insurer Beazley tumbled 7.8% after it warned of a $120 million hit from hurricane Ian.