Positive economic readings from China to end a data-heavy week weren't enough to lift Asian or European share prices, as investors focused on untamed inflation readings in the US and elsewhere and what these will mean for monetary policy.
The FTSE 100 index was down 35.11 points, or 0.5%, at 7,246.96 early Friday. It is down 1.3% so far this week. The mid-cap FTSE 250 index was down 116.72 points, or 0.6%, at 18,769.60. The AIM All-Share index was down 2.96 points, or 0.3%, at 864.42.
The Cboe UK 100 index was down 0.6% at 723.78. The Cboe 250 was down 0.6% at 16,156.92, and the Cboe Small Companies down 0.1% at 13,594.74.
In mainland Europe, the CAC 40 in Paris was down 1.0% early Friday, while the DAX 40 in Frankfurt was down 1.4%.
After a hotter-than-expected US inflation print earlier this week, investors now see the risk of a full 100 basis point - one percentage point - interest rate hike from the Federal Reserve next week.
Such aggressive action, along with the prospect of higher rates for longer, would heap further pressure on the US economy, sparking recession fears.
The World Bank has warned that the threat of a global recession is growing as central banks rightly focus on bringing down soaring inflation rates. The worst-case scenario described in a paper on Thursday would entail a recession in advanced economies, and sharp declines in growth in emerging and developing economies.
In the UK, this unease was in no way alleviated by crumbling retail sales.
Retail sales fell 1.6% month-on-month, far worse than the forecast 0.5% decline, according to FXStreet-cited consensus. This reversed a 0.4% rise in July.
The ONS said August's data continued ‘a downward trend since summer 2021 following the lifting of restrictions on hospitality; in recent months, rising prices and cost of living are also affecting sales volumes.’
‘The [UK] government's announcement of a two-year cap on energy prices came too late to have an impact on consumer behaviour in August,’ Lloyds Bank noted. ‘Moreover, it remains unclear just how much of an impact this will have given that real incomes for most workers are still falling.’
ING commented: ‘This morning's retail sales in the UK continued to show a deteriorating consumption picture in the UK, which emerged more from the continuation of a steady downtrend from last summer rather than the single grim data point in a rather volatile series. This has been the last important piece of data before the Bank of England meeting on Thursday and has hit the pound this morning.’
Sterling was quoted at $1.1412 early Friday, down from $1.1494 at the London equities close on Thursday.
The FTSE 350 retailers index in London was down 1.4%.
Economic data out of China on Friday was more encouraging.
The National Bureau of Statistics said retail sales in China increased 5.4% annually in August, beating an FXStreet cited forecast of a 3.5% climb. Retail sales growth quickened from a 2.7% rise in July.
China's industrial output improved 4.2% year-on-year in August, topping a market forecast of 3.8% growth, according to FXStreet. Industrial production had risen 3.8% yearly in July.
Instead of reacting positively to the data reports, Asian stocks responded to a shaky handover from New York. In China, the Shanghai Composite closed down 2.3% on Friday, while the Hang Seng index in Hong Kong was down 0.7% in late trade. The Nikkei 225 index in Tokyo was down 1.1% and the S&P/ASX 200 in Sydney down 1.5%.
The euro traded at $0.9987 early Friday in London, lower than $0.9996 late Thursday. Against the yen, the dollar was quoted at JP¥143.29, soft from JP¥143.36.
At the top of the FTSE 100 was AstraZeneca, up 1.2% after saying it received two recommendations for drug approvals in the EU, while a drug for blood disorder paroxysmal nocturnal haemoglobinuria met its primary endpoint in a phase three trial.
Astra's Evusheld Covid-19 antibody treatment has been recommended for marketing authorisation in the EU for adults with the virus at risk of progressing to severe disease. In addition, Beyfortus, which is being developed with Sanofi, has also been recommended for marketing authorisation in the EU, for the prevention of respiratory syncytial virus lower respiratory tract disease in newborns and infants during their first RSV season.
Finally, AstraZeneca said its phase three trial of Danicopan met its primary endpoint in blood disorder paroxysmal nocturnal haemoglobinuria.
Towards the bottom of London blue-chips was Land Securities, down 3.3%, after Goldman Sachs cut the property investor to 'sell' from 'neutral'.
Precious metals miner Fresnillo suffered from weaker gold prices, trading down 2.4%. Gold was quoted at $1,663.41 an ounce early Friday, down from $1,667.03 on Thursday.
Shell edged up 0.8% and BP rose 0.3% as oil prices recovered a touch. Brent oil was trading at $91.62 a barrel early Friday, up from $90.04 late Thursday.
The worst performing stock in the FTSE 250 was Royal Mail, slumping 8.9% after a downgrade to 'neutral' from 'overweight' at JPMorgan.
Still in the economic calendar for Friday, there is the consumer price index from the eurozone at 1000 BST.
Copyright 2022 Alliance News Limited. All Rights Reserved.
