European stocks declined on Friday morning after reports of explosions in Iran, fuelling worries of a conflict escalation.
The FTSE 100 index opened 50.93 points lower, 0.7%, at 7,826.12. The FTSE 250 was down 178.53 points, 0.9%, at 19,272.14. The AIM All-Share was down 4.15 points, 0.6%, at 741.14.
The Cboe UK 100 fell 0.7% to 781.46, the Cboe UK 250 was down 0.8% at 16,706.81, and the Cboe Small Companies lost 0.1% to 14,759.45.
In European equities on Friday, the CAC 40 in Paris was down 0.8% and the DAX 40 in Frankfurt slumped 1.0%.
In Tokyo, the Nikkei 225 tumbled 2.7%. The Shanghai Composite in China ended down 0.3%, while the Hang Seng was 1.0% lower in late dealings. The S&P/ASX 200 ended down 1.0% in Sydney.
Iran’s state media reported explosions in the central province of Isfahan Friday, as US media quoted officials saying Israel had carried out retaliatory strikes on its arch-rival.
Israel had previously warned it would hit back after Iran fired missiles and drones at Israel almost a week ago, in retaliation for a deadly strike on Iran’s embassy in Syria which Tehran blamed on its foe.
Fears of a major regional spillover from the Gaza war have since soared.
‘One of the concerned cities is Isfahan, home to several military bases and facilities, but also to nuclear facilities including the main technology centre. Iran said that the nuclear site is safe,’ Swissquote analyst Ipek Ozkardeskaya commented.
While equities fell in the wake, oil rose, but struggled to stay above the $90 a barrel mark for long.
A barrel of Brent oil surged to $87.93 early Friday, from $87.15 at the European equities close on Thursday. It had traded as high as $90.71, however.
Lloyds Bank analysts commented: ‘The oil price initially rose with Brent crude moving back above $90 but it has subsequently dropped back below $89 and is still below its level at the start of the week.’
Tensions in the Middle East have also boosted the dollar’s ‘position’, ING analysts said.
Against the dollar, sterling fell to $1.2437 early Friday, from $1.2464 at the time of the London equities close on Thursday. The euro fell to $1.0650 from $1.0660. Against the yen, the buck bought JP¥154.45, down from JP¥154.60.
ING added: ‘Safe-haven currencies are leading the pack, and there are now risks of a more structural bearish turn on EUR/USD.
‘JPY and CHF could gain more than the dollar in a geopolitically-driven risk-off scenario, but the dollar may be able to hold on to gains more easily once some geopolitical risk is priced out. That is because markets have received greater incentives to turn structurally more bullish on the dollar of late.’
A recent re-assessment of Federal Reserve interest rate expectations has supported the dollar. The Fed’s most recent projections suggested three rate cuts could be in the offing this year, though at least one of those has been priced out by the market.
New York Fed President John Williams on Thursday said the US central bank feels no ‘urgency to cut interest rates’.
The next Fed decision is on May 1. Another rate hold is expected.
In New York on Thursday, the Dow Jones Industrial Average rose 0.1%, the S&P 500 fell 0.2% and the Nasdaq Composite declined 0.5%.
Netflix fell 4.9% in after hours dealings. The streaming service reported bumper growth in new subscribers in the first quarter, alongside better-than-expected results, but predicted a slowdown in the second three months of the year.
In the three months to March 31, revenue rose 15% to $9.37 billion, from $8.16 billion a year prior.
Net income jumped 78% to $2.33 billion from $1.31 billion, while diluted earnings per share improved to $5.28, up 83% from $2.88.
In London, airline shares struggled, after surging on Thursday following a well-received trading statement from budget carrier easyJet. easyJet traded 2.2% lower early Friday, Wizz Air fell 2.1%, while British Airways parent IAG lost 2.7%.
Lloyds fell 1.0%. Peel Hunt kicked off coverage of the lender with a ’hold’ recommendation. It started both NatWest and Barclays at ’buy’, though the stocks traded down 0.5% and 0.9% amid Friday’s risk-off mood.
Elsewhere in London, 888 Holdings added 3.0%. The gambling firm said first quarter revenue topped guidance slightly, despite a small decline in the UK & Ireland online segment.
It reported first-quarter revenue of £431 million, down 3.2% on-year but ahead of the £420 million to £430 million it had predicted.
UK & Ireland online revenue alone fell 1% due to ‘reduced sports venues and increased customer investment across the Cheltenham Festival in comparison to last year’, which a 4% growth in gaming could not offset. The Cheltenham Festival is a major horse racing meet in the UK, which culminates with the annual Gold Cup race.
For the UK & Ireland, 888 said that revenue is expected to return to on-year growth in the second quarter of 2023, ‘driven by strong customer engagement, new product launches, and the annualization of safer gambling changes.’
Gold traded at $2,387.96 an ounce early Friday, up from $2,384.41 late Thursday.
UK retail sales volumes climbed year-on-year in March, but were flat on the month before, numbers on Friday showed.
According to the Office for National Statistics, retail sales rose 0.8% in March from a year prior, though were still 1.2% below the pre-pandemic level in February 2020.
Sales had declined 0.3% on-year in February.
Sales were flat in March from February, following a 0.1% rise in February from January. February’s reading was upwardly revised. Retail sales volumes for that month were initially reported to have been flat from January.
The outcome for March fell short of FXStreet-cited market consensus. Growth of 0.3% had been expected.
‘Within retail, sales were mixed, with automotive fuel and non-food stores sales volumes rising by 3.2% and 0.5%, respectively. This was offset by falls in food stores and non-store retailers of 0.7% and 1.5%,’ the ONS said.
‘Looking at the quarter, sales volumes increased by 1.9% in the three months to March 2024 when compared with the previous three months. This was following low sales volumes over the Christmas period for retailers.’
Pantheon Macroeconomics analyst Rob Wood commented: ‘Stagnating March retail sales provide a disappointing end to the quarter. Even so, stagnation is a significant turnaround from the large retail volumes falls seen over the past two years.’
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