US interest rate concerns and tensions in the Middle East weighed on local stocks at the open on Friday, with the FTSE 100 on track for a weekly decline, down 1.8% since last Friday.
UK retail sales hurt the pound, ensuring the FTSE 100 outperformed continental peers, however.
The FTSE 100 index opened down 32.82 points, 0.4%, at 7,466.71. The FTSE 250 was down 108.18 points, 0.6%, at 17,104.96, and the AIM All-Share lost 2.01 points, 0.3%, at 681.76.
The Cboe UK 100 was down 0.5% at 745.13, the Cboe UK 250 was down 0.9% at 14,801.85, and the Cboe Small Companies was down 0.3% at 12,899.44.
In European equities on Friday, the CAC 40 in Paris was down 1.1%, while the DAX 40 in Frankfurt was down 1.2%.
In the US on Thursday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.8%, the S&P 500 down 0.9% and the Nasdaq Composite down 1.0%.
Equities in New York were perturbed by comments from Federal Reserve Chair Jerome Powell.
Powell saying inflation is ‘still too high’ despite a recent slowdown.
Additional evidence of ‘persistently above-trend growth,’ or a reversal of the recent decline in job openings and softening of wage growth could cause the Fed to reconsider its current rate pause, he told a conference in New York.
US Treasury yields spiked overnight, with the 10-year only ever-so-slightly below the 5% threshold.
But a rise in yields could do some of the work for the Federal Reserve as far as tightening goes, taking some pressure off the central bank to hike rates.
Analysts at Lloyds Banking Group commented: ‘Today’s speeches by a number of US Fed policymakers will be the last before they go into their silent period ahead of their next interest rate update on November 1. Recent comments from Fed officials, including those yesterday from Chair Powell, have all suggested that in light of the recent sharp rise in bond yields they can afford to take their time in deciding whether any more interest rate hikes are needed. That seems to make a November rate increase highly unlikely.’
Sterling was quoted at $1.2114 early Friday, lower than $1.2149 at the London equities close on Thursday. The euro traded at $1.0573, little changed from $1.0576. Against the yen, the dollar was quoted at JP¥149.88, down a touch versus JP¥149.92.
UK retail sales were markedly weaker than expected last month, hurt by cost-of-living pressure and unseasonably warm weather, numbers showed.
According to the Office for National Statistics, retail sales volumes declined 1.0% year-on-year in September, easing from a 1.3% decline in August. However, retail sales had been expected to be flat on-year, according to FXStreet cited consensus.
Retail sales declined 0.9% in September from August, falling short of consensus. A monthly decline of 0.1% was forecast, according to FXStreet. In August, retail sales had fallen 0.4% from July.
Consumer confidence data for October similarly underwhelmed. Morale has plunged in the run-up to the festive season as uncertainties posed by conflict in the Middle East add to accelerating energy, fuel and mortgage costs.
GfK’s long-running consumer confidence index fell nine points to minus 30 in October, taking it back to a level last seen in July last year.
The index’s major purchase measure – an indicator of confidence in buying big ticket items – saw the sharpest drop of 14 points, in a significant turnaround from last month’s four-point increase which will concern retailers in the run-up to Christmas.
Brent oil was trading at $92.94 a barrel early Friday, higher than $91.28 late Thursday.
SPI Asset Management Stephen Innes said: ‘Oil prices crossed the $90-per-barrel mark, while gold came close to the $2,000-per-ounce level. This followed reports of drone attacks on US bases in Iraq and Syria. The Red Sea witnessed an American destroyer intercepting cruise missiles, and drones launched toward Israel by Houthi rebels in Yemen.’
In London, airline shares struggled as events in the Middle East continue to unsettle markets. Wizz Air fell 1.5%, while British Airways parent IAG declined 1.9%. Since the Hamas attack in Israel earlier in October, the stocks are down 18% and 11%.
Safe haven Gold was quoted at $1,981.08 an ounce early Friday, rising from $1,952.66 on Thursday. Gold miner Endeavour Mining climbed 1.6%.
In Asia on Friday, the Nikkei 225 index in Tokyo was down 0.5%. In China, the Shanghai Composite was down 0.7%, while the Hang Seng index in Hong Kong was down 0.9%. The S&P/ASX 200 in Sydney closed down 1.2%.
Back in London, InterContinental Hotels Group fell 2.4%. It said travel demand was ‘very healthy’ in the third-quarter of 2023, with a key performance marker topping pre-pandemic levels once again. The owner of the Holiday Inn and Crowne Plaza hotel brands said its revenue per available room in the third-quarter rose 11% year-on-year.
It delivered growth of 4.1% in the Americas region, 16% in the Europe, the Middle East, Asia & Africa segment and 43% in Greater China alone. Compared to 2019 levels, InterContinental Hotels Group said its revenue per available room was 13% higher in the third-quarter.
‘Travel demand remained very healthy during the quarter, and I would like to thank all our teams for supporting another strong trading period,’ Chief Executive Elie Maalouf said. ‘Greater China continued its excellent rebound with RevPAR now above 2019, which the Americas achieved in the second quarter of last year and EMEAA in the fourth quarter. Group-wide occupancy was 72%, just one percentage point behind 2019 which further confirms the near-complete return to pre‑Covid levels of demand. Pricing remained very robust.’
There was a warning on a tough economic backdrop, however.
Maalouf said: ‘Looking further ahead, whilst there are macro-economic uncertainties and some short-term financing challenges holding back new hotel development, I am excited about the future for IHG and the attractive, long-term demand drivers for our markets.’
Rightmove added 1.3%, the best FTSE 100 performer, reclaiming some of its 14% loss on Thursday. The stock tanked after fellow property portal OnTheMarket was acquired by US-listed CoStar.
ProCook slumped 16%. The pots and pans seller said it remains ‘cautious’ about its full-year outlook, despite feeling ‘well prepared’ for the pivotal Christmas period.
ProCook said revenue in the second quarter ended October 15 fell 1.8% on-year to £15.7 million. However, revenue was 0.8% higher on a ‘continuing business basis’, excluding Amazon EU, where it discontinued sales last year.
ProCook said: ‘The second quarter results reflect a strong summer sale performance during July and August, aided by considerably more favourable weather year on year. Trading in September and into early October has been markedly softer, with lower footfall and traffic, and customers increasingly seeking out greater value and promotional offers.’
ProCook, which generates around 60% of its full-year sales in the second half of its financial year, said it is ‘well prepared for this peak trading period’.
It added: ‘However, the board remains cautious with regards to [financial 2024] outlook given the highly challenging market conditions which persist, and the current trading volatility and sales trends over recent weeks, with customers seeking more value and taking more time to research before committing to purchase. Whilst forecasting the specific timing and pace of the market recovery is challenging, the board is confident it will recover given the attractive market dynamics. When it does recover, the board believes ProCook is well positioned to deliver improved financial performance and further market share gains given the strength of the brand and operating model.’
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