European stocks traded lower at midday on Friday as weak US data sparked concerns that growth in the world’s largest economy could be slowing.
The FTSE 100 index was down 34.90 points, 0.4%, at 8,248.46. The FTSE 250 was 358.17 points, 1.7%, at 21,101.06, and the AIM All-Share was down 5.27 points, 0.7%, at 777.81.
The Cboe UK 100 was down 0.4%, the Cboe UK 250 was down 1.2% at 18,461.00, and the Cboe Small Companies was down 0.9% at 17,120.68.
In European equities, the CAC 40 in Paris was 0.9%, while the DAX 40 in Frankfurt was down 1.6%.
‘So much for the big equity rally when interest rate cuts take centre stage,’ said Russ Mould, investment director at AJ Bell.
‘Investors thought rates cuts – which have just happened in the UK and looked poised to take place next month in the US – would energise stock markets. The opposite has happened with a bad day on Thursday and weakness extending into Friday, meaning August is so far off to a bad start.
‘Weak economic data from the US spooked the market and reminded investors there are negative reasons why central banks might cut rates, not simply lowering the cost of borrowing because the rate of inflation is easing.’
The latest tranche of US economic data ignited fears of a potential recession. Thursday’s manufacturing PMIs both indicated a contraction in US factories, while the latest initial jobless claims print pointed to a weaker-than-expected labour market.
The next key print - the nonfarms payrolls data - comes at 1330 GMT. The NFP data is expected to show the pace of hiring eased to 175,000 in July, from 206,000 in June, according to FXStreet cited consensus.
In addition to the economic woes, the latest round of US tech earnings failed to impress. Apple shares were 0.3% lower in pre-market trading. Despite a solid set of numbers, the iPhone maker failed to wow the market.
Amazon, meanwhile, fell 8.3% in pre-market trade, with CFO Brian Olsavsky admitting the firm came in ‘a little short’ on North American revenue growth, as consumers opt for cheaper products.
Intel was down 21% ahead of the New York open, as it suspended its dividend and announced plans to cut 15% of its workforce.
Meanwhile, in foreign exchange markets, the Bank of England’s latest rate cut was weighing on the pound.
The pound was quoted at $1.2743 early Friday, softening from $1.2771 at the time of the London equities close Thursday. The BoE enacted its first rate cut in over four years on Thursday, lowering bank rate by a quarter percentage point to 5.00%. However, the central bank warned it would not do ‘too much too soon’ when it comes to further easing.
The euro stood at $1.0819, up from $1.0787. Against the yen, the dollar was trading at JP¥148.77, down from JP¥150.09.
According to Brown Brothers Harriman, traders are once again getting ‘carried away’ with expectations of easing from the US Federal Reserve.
‘This is clearly an overreaction to the Fed’s dovish hold, coupled with some softness in the economic data,’ BBH maintained.
‘Despite growing concerns that the Fed is behind the curve and reacting too slowly to early signs of softer US economic activity, we are more constructive on the outlook. As such, we continue to believe that the Fed will cut in September but will not cut as aggressively as market pricing.’
In the FTSE 100, GSK rose 2.1%, as the US Food & Drug Administration expanded the approval of its cancer medicine Jemperli, also known as dostarlimab, in endometrial cancer.
Meanwhile, there were mixed fortunes for London-listed airlines.
British Airways owner IAG was the top performer, climbing 7.2%. It said Thursday it has abandoned plans to buy Spain’s Air Europa, citing regulatory concerns.
IAG also paid its first dividend since 2019 despite a marginal fall in half-year profit. It had been expected to report results on Friday. IAG will pay Air Europa owner Globalia €50 million as a result of the termination.
In February 2023, IAG said it will buy the remaining 80% stake in Air Europa for around €500 million, after it had secured a 20% stake in August 2022. It will continue to hold the minority interest.
Chief Executive Luis Gallego said the decision was in the best interests of shareholders.
In the FTSE 250, Wizz Air fell 5.3%.
The Budapest-based carrier said it carried 5.9 million passengers in July, down 1.4% from 6.0 million a year before. Its load factor also slipped, to 93.8% from 94.9%.
Capacity was down 0.3%, due to geared turbofan engine-related groundings of A321neo planes, Wizz said. The airline also was hurt by the worldwide IT outage on July 19, which disrupted about 1% of its scheduled flights last month, it said.
Dublin-based rival Ryanair fared better last month, as passenger numbers rose 8.0%.
Brent oil was quoted at $79.70 a barrel midday Friday, down from $80.48 at the time of the closing bell in London on Thursday. Gold rose to $2,464.36 an ounce, from $2,448.60.
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