Stocks in London edged into the red on Friday, with European markets cautious ahead of a key US inflation print this afternoon, as new economic data revealed the UK is on the brink of recession.
The London Stock Exchange will shut at 1230 GMT on Friday, marking the start of Christmas celebrations. They will then be shut on Monday and Tuesday for Christmas Day and Boxing Day.
The FTSE 100 index opened down 3.11 at 7,691.62. The FTSE 250 was down 33.93 points, 0.2%, at 19,537.04, and the AIM All-Share was down 1.45 points, 0.2%, at 751.00.
The Cboe UK 100 was down 0.1% at 767.83, the Cboe UK 250 was down 0.1% at 17,039.00, and the Cboe Small Companies was flat at 14,707.09.
In European equities on Friday, the CAC 40 in Paris was up 0.1%, while the DAX 40 in Frankfurt was down marginally.
In the US on Thursday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.9%, the S&P 500 up 1.0% and the Nasdaq Composite up 1.3%.
Investors are keeping an eye on a key US personal consumption expenditures price index print on Friday. It is the Federal Reserve’s preferred metric of inflation.
According to FXStreet, the core PCE index is expected to cool to 3.3% in November year-on-year, from 3.5% in October. The core reading, the Fed’s preferred inflation gauge, does not include food or energy.
‘Today’s inflation print is the Fed puzzle’s last crucial piece. If today’s PCE print comes in as soft as expected, or ideally softer-than-expected, we shall see the rally in bonds – and perhaps in stocks – extend the Santa rally,’ said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Last week, the Federal Open Market Committee extended a pause in monetary policy that has been in place since July, leaving the federal funds rate at a 22-year high of 5.25% to 5.5%. At the time, Federal Reserve Chair Jerome Powell said that while interest rates ‘are at or near the peak of the cycle’, the committee ‘has been surprised before and will do more if needed to bring inflation down’.
Early on Friday, there was little to celebrate in the UK as data showed that it is on the brink of recession.
The Office for National Statistics reported second estimates for gross domestic product growth in the UK.
In the third quarter, the ONS estimates that registered a 0.1% fall quarter-on-quarter, having previously estimated that growth was stagnant. In the second quarter, the economy saw no growth from the first quarter, revised down from a 0.2% expansion.
However, the reading, suggesting the UK economy is more fragile than previously thought, will pile pressure on the Bank of England to cut interest rates. Like the Fed, the BoE kept rates unchanged last week.
In the FTSE 100, JD Sports Fashion lost 4.9%, on the back of Nike shares dropping 12% in after-market trading in New York.
Nike said it expects a ‘softer’ second-half revenue outlook but emphasised it remained focused on ‘strong’ gross margin execution and disciplined cost management.
Regarding costs, the sportswear company said it ‘is identifying opportunities to deliver up to $2 billion in cumulative cost savings over the next three years. Areas of potential savings include simplifying our product assortment, increasing automation and use of technology, streamlining our organization, and leveraging our scale to drive greater efficiency.’
HSBC was up 0.6%.
The Asia-focused bank said the sale of its business in Canada to Royal Bank of Canada has received approval from the Canadian minister of finance, enabling the deal to proceed.
HSBC and RBC announced had announced the agreement in November last year. Toronto-headquartered RBC will buy all the shares of HSBC Bank Canada for C$13.5 billion, around $10.16 billion, in cash.
On AIM, Bidstack shares more than doubled to 0.75 pence.
Bidstack said it has reached a settlement and new commercial partnership with Azerion. A total payment of €3 million will be made by Azerion for the settlement.
Following the settlement, Bidstack and Azerion will enter into a new commercial partnership which will be operational in early 2024.
‘Bidstack will work with Azerion’s supply side platform, Improve Digital on a non-exclusive basis to enable Azerion to access Bidstack’s premium gaming inventory,’ the company said.
The pound was quoted at $1.2701 early on Friday in London, down compared to $1.2734 at the equities close on Thursday. The euro stood at $1.1004, higher against $1.0988. Against the yen, the dollar was trading at JP¥142.25, lower compared to JP¥142.35.
In Asia on Friday, the Nikkei 225 index in Tokyo was up 0.1%. In China, the Shanghai Composite closed down 0.1%, while the Hang Seng index in Hong Kong was down 1.7%.
In Hong Kong, Tencent shares plunged 12%, after the government announced new plans to restrict the online gaming industry. Rival Netease plunged 25%.
New draft restrictions published online by the regulator are aimed at limiting in-game purchases and compulsive playing behaviour.
The S&P/ASX 200 in Sydney closed down marginally.
Brent oil was quoted at $80.11 a barrel early in London on Friday, up from $79.05 late Thursday. Gold was quoted at $2,051.33 an ounce, higher against $2,040.66.
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