European equities ended lower on Friday, though the pound and euro climbed, as Federal Reserve interest rate expectations swung to-and-fro after contrasting US data in the afternoon.
A stronger employment report meant some rethought their rate cut expectations for March. Interest rate nerves were soothed later, however, after an underwhelming reading of the US service economy.
Among individual shares, London-listed Revolution Bars, and the makers of some of the spirits you might find in its sites, ended lower - albeit for different reasons. Endeavour Mining’s dramatic chief executive change hit its stock, while a promising update lifted Clarkson shares.
The FTSE 100 index ended down 33.46 points, 0.4%, at 7,689.61. It had traded as low as 7,642.86 points, however.
The FTSE 250 lost 161.66 points, 0.8%, at 19,210.39 and the AIM All-Share closed down 4.70 points, 0.6%, at 751.24.
During the first trading week of the year, the FTSE 100 lost 0.6%, the FTSE 250 shed 2.4% and the AIM All-Share gave back 1.6%.
The Cboe UK 100 fell 0.5% at 768.03 on Friday, the Cboe UK 250 lost 0.9% at 16,718.07, while the Cboe Small Companies inched up 0.1% to 14,958.58.
In European equities, the CAC 40 in Paris ended down 0.4%. The DAX 40 in Frankfurt closed down 0.1%.
In New York, the Dow Jones Industrial Average was up 0.2%, the S&P 500 climbed 0.4% and the Nasdaq Composite added 0.5%.
Investors had initially dialled back their Federal Reserve rate cut bets following Friday’s nonfarms data.
According to the Bureau of Labor Statistics, the US economy added 216,000 jobs in December, beating the FXStreet cited consensus of 170,000 additions.
Job growth picked up from 173,000 in November, a figure which was downwardly revised from 199,000. October’s figure was lowered to 105,000 from 150,000, so job additions in October and November combined were 71,000 lower than first reported.
The data took a bite out of rate cut bets by the Federal Reserve for the month of March. According to the CME FedWatch Tool, expectations for the March initially meeting moved closer to a 50% chance of a cut in the wake of the nonfarms reading.
However, a tepid reading of the US service sector from the Institute of Supply Management solidified cut expectations again. A cut in March is now 75% likely, according to the CME tool.
The latest ISM services purchasing manager’s index faded to 50.6 points in December, from 52.7 in November. It remained above the 50.0 no change mark, however.
‘The plunge in the ISM services index to a 7-month low in December suggests, at face value, that the economy is sliding into recession. But the poor relationship between the surveys and the hard economic data in recent times suggests we should take this latest reading with a pinch of salt,’ Capital Economics analyst Andrew Hunter commented.
Sterling was quoted at $1.2738 late Friday afternoon, higher than $1.2696 at the London equities close on Thursday. The euro traded at $1.0966, up from $1.0961. Against the yen, the dollar was quoted at JP¥144.29, down versus JP¥144.48.
It was somewhat of a reversal for the dollar. The euro had traded as low as $1.0877 after the US jobs data, and the pound as low as $1.2611.
Among European equities, spirit makers closed lower, as developments between China and Europe hurt the beverage sector.
China said Friday it had launched an anti-dumping investigation into brandy imported from the EU, as commercial tensions flare between the two trading superpowers.
The Ministry of Commerce said the probe followed a complaint filed in November by China’s liquor association on behalf of the domestic brandy industry.
In London, Diageo fell 1.6% in a negative read across. In Paris, Pernod Ricard, which owns the Ararat brandy brand, slumped 3.6%.
Back in London, Endeavour Mining dropped 6.9% after it late Thursday ousted Chief Executive Sebastien de Montessus for ‘serious misconduct’ and with immediate effect.
Clarkson added 6.6%. The shipping services firm said its annual performance for 2023 is anticipated to be ahead of current market expectations. It expects underlying pretax profit of no less than £108 million. It credits strong trading throughout the final quarter, particularly in its Broking division.
Analysts at Liberum commented: ‘It has been easy for the market to dismiss Clarkson’s performance as being the result of favourable shipping market conditions, with the Clarksea index having risen by 93% in 2021 and by 30% in 2022, both on a year-average basis. In contrast, in 2023 we believe the index fell by 37% on a year-average basis. Although earnings growth is set to be much more modest in 2023 than in the two prior years, it is still positive in tougher market conditions. In our view, this reflects Clarkson’s leading market positions, the resilience of its business model and the strong underlying structural growth of the business.’
Revolution Bars tumbled 21%. The pub and bar operator will close eight of its least profitable bars, as its younger customer base suffers disproportionately from the UK’s cost-of-living crisis.
It also pointed to a challenge from the 10.8% increase to the national living wage to come in April.
However, Revolution said it had seen its best festive trading season in four years. Like-for-like sales rose 9.0% in the period from December 4 to 31. Still, group like-for-like sales for the first half - including New Year’s Eve - remained negative at minus 2.8%.
Brent oil was trading at $78.82 a barrel late Friday, higher than $76.60 late Thursday, with prices continuing to bounce amid developments in the Middle East.
Shipping firm Maersk said it will avoid the Red Sea and divert ships around Africa for the ‘foreseeable future’.
The Danish company cited a ‘highly volatile’ situation and noted that the security risk ‘continues to be at a significantly elevated level,’ and that it had ‘therefore decided that all Maersk vessels due to transit the Red Sea/Gulf of Aden will be diverted south around the Cape of Good Hope for the foreseeable future,’ it said in a statement.
Gold was quoted at $2,051.00 an ounce late Friday afternoon, up from $2,045.01 on Thursday.
Monday’s economic calendar has eurozone consumer confidence and retail sales readings at 1000 GMT. Financial markets in Tokyo will be closed for Coming of Age Day.
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