London shares on Friday ended a mostly dismal year with another decline, leaving the FTSE 100 essentially flat in 2022 but smaller listings well down.
The FTSE 100 index closed down 60.98 points, 0.8%, at 7,451.74 in a half-day session on Friday. The FTSE 250 ended down 143.45 points, 0.8%, at 18,853.00, and the AIM All-Share fell 5.12 points, 0.6%, closing at 831.33.
The FTSE 100 shed just 0.7% in 2022, but London mid- and small-cap stocks fared much worse. The UK domestic-focused FTSE 250 fell 21% and the AIM All-Share lost 31%.
The Cboe UK 100 ended down 0.5% at 747.21 on Friday, the Cboe UK 250 closed down 0.6% at 16,363.02, and the Cboe Small Companies ended up 0.3% at 13,233.01.
In European equities on Friday, the CAC 40 in Paris was down 0.7% in early afternoon trade, while the DAX 40 in Frankfurt was down 0.8%. They are down 9.5% and 13% respectively this year.
The FTSE 100 managed to outperform its continental equivalents, benefiting from a heavier weighting of certain sectors.
This includes two of the index’s largest members, oil majors BP and Shell, which jumped 35% and 37% over the course of the year.
In a year rocked by an energy crisis caused by Russia’s war on Ukraine, the price of oil saw sustained periods of elevation. A barrel of Brent crude peaked at $139.13 in March, and traded comfortably above $100 over the spring and summer.
However, as fears of a slowdown in global demand set in, oil prices finished the year on a similar footing to how they started.
BP and Shell closed the day down 1.2% and 1.0%, while a barrel of Brent fetched $83.21, up from $82.78 late Thursday. Brent was priced at $78.32 at the end of equity trading in London a year ago.
The war in Ukraine also boosted defence contractor BAE Systems. It was down 0.7% on Friday, but up 54% in 2022.
‘Of course, the biggest British companies do not reflect the underlying British economy, so the FTSE 100’s good performance won’t change the fact that smaller, and domestic-focused companies will likely continue to suffer from high inflation, recession and perhaps another year of political turmoil as a cherry on top,’ said Swissquote Bank’s Ipek Ozkardeskaya
Another major theme of the past year was the historic interest rate hikes enacted by central banks to grapple with surging levels of inflation not seen in decades.
This marked the ‘end of the cheap money era’, Ozkardeskaya noted, with the consequences likely to begin in earnest next year.
‘We didn’t know it at that time but the 2022 bear market officially kicked off just a couple of days after the year started, when the first Federal Open Market Committee minutes release of the year showed that the Fed was not kidding about the rate hikes, and that the financial conditions would get real tighter over the year,’ she commented.
‘And man, they got tighter?way tighter than we expected a year ago, with the Fed raising its interest rates 425 basis points starting from March.’
The mostly hawkish positioning from the Fed meant the dollar saw strong gains over the year, before easing somewhat in recent weeks as the central bank scaled down its interest rate hikes to 50 basis points.
The ascendant greenback was supportive of the FTSE 100, with many of its constituents making the bulk of their revenue in dollars.
Sterling was quoted at $1.2054 at the London equities close at 1230 GMT on Friday, firm on $1.2057 at the London equities close on Thursday. However, cable was down around 10% from the beginning of the year.
The euro traded at $1.0686, edging up from $1.0661 late Thursday. Against the yen, the dollar was quoted at JP¥131.84, down versus JP¥133.31.
Stocks in New York were called lower on Friday, with the DJIA down 0.4%, the S&P 500 index down 0.6%, and the Nasdaq Composite down 1.0%.
The Dow looks set to end the year down around 10%, with the S&P 500 losing nearly 20%, and the tech-heavy Nasdaq Composite losing around a third of its value.
Gold was quoted at $1,818.60 an ounce on Friday, higher than $1,811.91 on Thursday. It had ended 2021 around the exact same level of $1,819.
Meanwhile, in a fitting end to a bruising year, London’s housebuilding stocks struggled on Friday.
Persimmon, Barratt and Taylor Wimpey closed down 3.0%, 3.1% and 2.1% respectively. They plunged have 58%, 48%, and 43% annually.
Friday’s decline follows data from building society Nationwide showing UK house prices fell for the fourth month in a row this month, marking the worst run since the financial crisis of 2008.
In December, house prices fell 0.1% on a monthly basis, easing from a monthly fall of 1.4% in November. On an annual basis, house prices rose 2.8% in December, slowing from growth of 4.4% the month before.
‘While financial market conditions have settled, mortgage rates are taking longer to normalise and activity in the housing market has shown few signs of recovery,’ warned Nationwide Chief Economist Robert Gardner.
On AIM, Inspirit Energy tumbled 23%, as it warned it will miss the December 31 deadline to publish its annual results. Trading in its shares will be suspended from Tuesday, but it expects its audit to be complete by next Friday.
Mobile Streams added 15%.
In the year ended June 30, the gaming-focused content group said revenue more than doubled to £1.0 million from £395,000 the year before. It also announced an extension of its contract with International Gaming Systems for six months from January. This follows announcing the contract win during its financial 2022, which provided around £586,000 in revenue streams.
However, its pretax loss for the year was £2.8 million, almost trebling from £1.0 million.
London and other global markets, including New York and Tokyo, will be closed on Monday to observe New Year’s Day.
The economic calendar for next week has eurozone and German manufacturing purchasing managers’ indices on Monday, with manufacturing PMIs from the UK, US, Ireland and China to follow on Tuesday. Various services PMIs will follow on Wednesday and Thursday.
In the corporate calendar next week, there are no events scheduled for the first three days.
Next will be the first UK retailer to release a post-Christmas trading update next Thursday, alongside B&M European Value Retail and bakery chain Greggs.
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