The FTSE 100 outperformed in a tepid end to the week for European shares on Friday, with a hawkish hold from the US Federal Reserve still weighing on sentiment.
London’s FTSE 100 only notched a minor gain, but looked like achieving a more convincing advance, before running out of steam towards the close of play.
Stocks in New York endured a miserable session on Thursday but recovered some ground on Friday.
The FTSE 100 index edged up 5.29 points, 0.1%, at 7,683.91. The FTSE 250 lost 31.71 points, 0.2%, at 18,606.84, and the AIM All-Share ended up 0.52 of a point, 0.1%, at 739.43.
For the week, the FTSE 100 lost 0.4%, the FTSE 250 gave back 1.0% and the AIM All-Share declined 0.8%.
The Cboe UK 100 rose 0.2% to 766.87, the Cboe UK 250 edged up fractionally to 16,282.89, and the Cboe Small Companies rose 0.2% at 13,588.41.
The CAC 40 in Paris closed down 0.4%, while the DAX 40 in Frankfurt ended down 0.1%.
In New York, stocks recovered some poise after dramatic falls on Thursday. The Dow Jones Industrial Average was up 0.2% at the time of the European close, while the S&P 500 and Nasdaq Composite added 0.5% and 0.8%.
‘Many investors had hoped we would approach the end of 2023 with a clearer picture on when interest rates will start to be cut. That scenario has now been muddied by comments from the Fed that it is prepared to raise rates further if necessary and keep a restrictive policy until there are clear signs that inflation is moving back to target levels,’ AJ Bell analyst Russ Mould commented.
The pound was quoted at $1.2267 at the time of the London equities close, down compared to $1.2297 on Thursday. The euro stood at $1.0664, slightly higher against $1.0658.
Sterling weakened dramatically in the wake of the Bank of England deciding against a rate hike. Poor UK PMI data did not do much for the pound either.
The severity of the UK private sector downturn deepened in September, according to preliminary survey data on Friday.
The S&P Global/CIPS flash UK flash composite purchasing managers’ index fell to a 32-month low of 46.8 points in September from the final reading of 48.6 in August. This was worse than FXStreet-cited market consensus of 48.7 points.
Manufacturing continued to decline at a faster pace than services, with the factory sector’s flash PMI edging up to 44.6 from 44.1. However, the gap between the two sectors narrowed, as the flash services PMI worsened to 47.2 from 49.5.
At its September meeting on Thursday, the Bank of England maintained bank rate at 5.25%, a more than 15-year high, in what was something of a surprise move.
Against the yen, the dollar was trading at JP¥148.22, up compared to JP¥147.38. The yen weakened after the Bank of Japan left its ultra-loose monetary policy in place, as was widely expected, and showed no sign of shifting its approach to monetary policy.
The Bank of Japan on Friday left its ultra-loose monetary policy in place, as was widely expected, and showed no sign of shifting its approach to monetary policy.
The BoJ said it voted unanimously to keep its negative interest rate of minus 0.1%, which was expected by the market, according to FXStreet-cited consensus.
The bank said it would maintain its yield curve control range of plus or minus 0.5 percentage points of its target level for its 10-year Japanese government bonds.
Bringing US rate worries to the fore again, a senior official said the Federal Reserve has more work to do to tackle high inflation despite making ‘considerable’ progress in the last 18 months.
Earlier this week, Fed officials unanimously voted to hold interest rates at a 22-year high while indicating they expect another hike will be needed to bring inflation down to the US central bank’s long-term target of two percent.
The decision postponed additional pain for millions of Americans already struggling with the impact of the Fed’s existing hikes on mortgages and other loans.
Although the Fed has made ‘considerable progress on lowering inflation,’ it remains ‘too high,’ warranting further action, Fed Governor Michelle Bowman told a conference in Colorado, according to prepared remarks.
‘I continue to expect that further rate hikes will likely be needed to return inflation to 2% in a timely way,’ she added.
In London, Ocado ended 6.6% higher, as the online grocer and warehouse technology company recovered from a deep sell-off on Thursday. Ocado shares slumped 20% on Thursday.
Elsewhere, Ascential also added 6.6%. The company said revenue in its first half climbed to £307.4 million from £260.7 million a year before. Its pretax loss narrowed to £11.8 million from £41.6 million. The business-to-business media and events firm said it has seen a ‘solid start’ to its second half, which is seasonally weaker than the first six months of the year.
‘Despite continued macro uncertainty impacting the industries we serve and currency headwinds, our businesses remain well set for the year, supported by multiple growth levers,’ Ascential CEO Duncan Painter said.
Pendragon surged 12% after revealing that it received a revised takeover tilt from Hedin and Penske.
The revised offer prices Pendragon shares at 32 pence each, valuing the car dealer’s equity at £447.0 million. The firm is considering the offer.
Pendragon on Wednesday said it rebuffed a 28 pence per share proposal, which would value the firm at around £391 million.
It is the latest twist in a busy week for the company. On Monday, it said it agreed to sell its entire UK motor business and leasing business to Lithia Motors.
It would mean Pendragon will operate as a standalone Pinewood business, making it a pure-play software as a service business.
Pendragon on Friday said roughly 29% of shareholders have backed the Lithia deal.
Brent oil was quoted at $92.32 a barrel late Friday in London, down from $94.17 late Thursday. Gold fetched $1,927.93 an ounce, up against $1,918.13.
Monday’s economic calendar has the latest German Ifo business climate index reading at 0900 BST.
The local corporate calendar has half-year results from connectivity technology provider Alphawave IP Group and video game publisher Devolver Digital.
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