European stocks suffered an underwhelming end to a difficult week which saw equities suffer as US interest rate cut expectations faltered.
In the UK, a hotter-than-expected inflation reading had traders reconsider rate bets for the Bank of England. Softer UK retail sales data on Friday swung the pendulum back towards a May cut by Threadneedle Street, however.
The FTSE 100 index edged up just 2.84 points to 7,461.93. The FTSE 250 fell 76.63 points, 0.4%, at 18,871.41, slipping into negative territory after a positive start to the day. The AIM All-Share fell 5.18 points, 0.7%, at 735.83.
For the week, the FTSE 100 lost 2.1%, its third-successive weekly loss. The FTSE 250 lost 1.7%. The AIM All-Share returned 1.8%.
The Cboe UK 100 edged up 745.81, the Cboe UK 250 fell 0.7% to 16,295.89, though the Cboe Small Companies rose 0.1% to 14,904.25.
In New York, both the Dow Jones Industrial Average and S&P 500 were up 0.5%. The Nasdaq Composite was 0.7% higher.
In European equities on Friday, the CAC 40 in Paris lost 0.4%, the DAX 40 in Frankfurt fell 0.1%.
The pound was quoted at $1.2669 late on Friday in London, down compared to $1.2687 at the equities close on Thursday.
The softer pound helped shield the FTSE 100 from the declines seen in other blue-chip European benchmarks.
Sterling fell in response to poor UK data.
According to the Office for National Statistics, retail volumes saw their largest monthly fall since January 2021, amid Covid-19 restrictions. This came as a shock to the market, which had been expecting only a slight decline.
Retail sales fell 3.2% in December from November, coming in well below market consensus. A monthly decline of 0.5% was forecast, according to FXStreet. In November, retail sales had risen 1.4% from October.
The signs of a faltering domestic economy helped revive hope that the Bank of England might be quicker to begin cutting rates.
‘For markets, the decline in retail sales does reverse some of the repricing around the May rate cut that occurred after Wednesday‘s surprise rise in CPI inflation.’ Scope Markets analyst Joshua Mahony commented.
The euro stood at $1.0884 at the time of the European equities close on Friday, higher against $1.0853 on Thursday. Against the yen, the dollar was trading at JP¥148.18, up from JP¥148.11.
Both the European Central Bank and Bank of Japan announce interest rate decisions next week.
Analysts at ING commented: ‘In short, we think President [Christine] Lagarde and her colleagues are not as obsessed with the market’s doveish pricing as many believe, and that they would rather stick to pure data-dependency and avoid offering guidance rather than focusing their efforts on a rate cut pushback. In other words, do not expect a significant change in the ECB’s language this month.’
The BoJ’s decision comes in the wake of softer Japanese inflation data.
Prices in the world’s third-largest economy, excluding volatile fresh food, rose 2.3% year-on-year in December compared with 2.5% the previous month. The figure was in line with market expectations and continued a broad trend of cooling inflation over the past year, down from 4.2% in January 2023.
The headline rate eased to 2.6% from 2.8%.
SPI Asset Management analyst Stephen Innes commented: ‘At its January meeting, Tokyo’s economists expect the Bank of Japan to maintain its policies for the yield curve control and negative short-term rates. So, a wild card scenario is a YCC tweak. Inflation is expected to slow down in January. Hence, a cautious BoJ approach will most likely prevail, especially after the recent earthquake.’
In London, 4imprint shares surged 13%. The London-based marketer and distributor of promotional products expects revenue for 2023 to be $1.33 billion, up 16% from $1.14 billion a year earlier.
Pretax profit for 2023 is expected to be at least $140 million, up from $104 million and slightly above the upper end of the current range of analysts’ forecasts.
‘Excellent progress has been made by the group during the course of 2023, giving rise to a strong financial performance for the year,’ 4imprint said.
Elsewhere, there was some M&A impetus for some shares.
Wincanton jumped 48%.
The Wiltshire, England-based logistics provider agreed on the terms of a recommended cash takeover offer from CEVA Logistics UK, a subsidiary of CMA CGM, a shipping and logistics company based in Marseille, France. The offer is for 450 pence a share, valuing Wincanton at £566.9 million on a fully diluted basis, with an enterprise value including debt of around £764.9 million.
Custodian Property Income fell 13%, while abrdn Property Income surged 11% after the duo announced a tie-up, to create a real estate investment trust with combined assets of £1.0 billion.
abrdn Property Income shareholders will receive 0.78 of a new Custodian Property Income share for each share held. Based on Custodian’s closing share price on Thursday of 79.6 pence, the deal values abrdn Property Income shares at 62.1p and the entire company at £237 million.
Big Technologies dropped 16%. The remote people monitoring technology company provided a somewhat downbeat outlook for 2024.
It warned revenue from a contract of one of its one of its larger Colombia-based customers will probably end in the first half. However, new recent contract wins will partially offset the potential loss.
In the second half of 2023, it expanded business development efforts in the US, with the associated costs likely to reduce operating profit margins in the US until the firm realises new sales.
The investment is likely to accelerate sales growth over the medium term. Consequently, the firm is guiding for sales to be ‘at least’ in line with 2023. It expects revenue for 2023 to be around £55 million, rising from £50.2 million and in line with market consensus.
Brent oil was quoted at $79.06 a barrel late Friday in London on Friday, up from $78.61 late Thursday. Gold was quoted at $2,035.35 an ounce, up against $2,015.55.
Monday’s economic calendar has an interest rate decision from the People’s Bank of China overnight.
The local corporate calendar has a trading statement from advertising agency S4 Capital.
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