Stock prices fell in London on Friday morning as disappointing UK retail sales data knocked investor sentiment.
The FTSE 100 index opened down 62.84 points, 0.9%, at 7,247.37. The FTSE 250 was down 167.38 points, 0.9% at 18,188.69, and the AIM All-Share was down 3.90 points, 0.5%, at 736.22.
The Cboe UK 100 was down 0.8% at 723.03, the Cboe UK 250 was down 0.9% at 15,976.07, and the Cboe Small Companies was slightly higher at 13,599.67.
In European equities, the CAC 40 in Paris was down 0.5%, while the DAX 40 in Frankfurt was down 0.4%.
‘Whether it’s the brewing crisis in the Chinese property market, the surge in US bond yields on fears rates will stay higher for longer or the big drop in UK retail sales, things are starting to look a bit ugly out there,’ said AJ Bell investment director Russ Mould.
Over the week, investors have contended with heightened concerns over China’s economy, following disappointing data, and signs of liquidity trouble at some of its major firms. Further, a strong set of economic data from the US alongside hawkish minutes from the Federal Reserve has stoked fears that interest rates may have further to climb. The threat of credit downgrades for US banks from Fitch is also looming over markets, not long after the ratings agency had cut its assessment of US debt.
On Friday morning, investors were faced with a worse-than-expected slump in UK retail sales.
The Office for National Statistics said retail sales fell 3.2% annually in July, compared to a downwardly-revised 1.6% fall in June. The market had been expecting a 2.1% fall for July, according to FXStreet-cited consensus.
From the previous month, sales fell 1.2% in July, compared to a downwardly-revised 0.6% rise in June. July’s reading was worse than market consensus, which had forecast a 0.5% decline.
‘Slowing retail sales would normally be seen as a sign of consumer stress, but this feels more like a weather related blip and it‘s unlikely the Bank of England will give these numbers anything more than a cursory glance when it comes to next month’s interest rate decision,’ considered AJ Bell’s Danni Hewson.
The gloomy retail figures dragged FTSE 100 retailers lower, with Frasers losing 1.4%, and JD Sports down 1.3%. It was a similar story in the midcaps, with Dunelm down 1.5%, and Pets at Home down 1.3%.
Meanwhile, US equities had struggled on Thursday as bond yields soared amid lingering concerns over inflation and rising interest rates. Adding fuel to the fire, the latest US jobs print showed no sign of loosening in the labour market, as weekly jobless claims edged lower.
Wall Street ended in the red, with the Dow Jones Industrial Average down 0.8%, the S&P 500 down 0.8% and the Nasdaq Composite down 1.2%.
Investors were still digesting Thursday’s hawkish minutes from the Federal Reserve’s July meeting. Fed officials continue to see ‘significant’ upside risks to inflation and suggested further interest rate increases may be necessary, the minutes revealed.
Sterling was quoted at $1.2718 early Friday, lower than $1.2746 at the London equities close on Thursday. The euro traded at $1.0869, a touch lower than $1.0872.
In Asia on Friday, the Nikkei 225 index in Tokyo closed down 0.6%.
Japan’s consumer price inflation eased to 3.1% year on year in July, in line with market expectations, government data showed. The figure for the world’s third-largest economy, which excludes volatile fresh food prices, followed a 3.3% reading in June. Stripping out fresh food and energy, Japan’s prices rose 4.3%, data published by the internal affairs ministry showed.
Friday’s core consumer price index figure matched market expectations of 3.1% recorded in a Bloomberg survey. Prices for processed food, telecommunication costs and hotel rates rose while electricity bills declined.
Against the yen, the dollar was quoted at JP¥145.33, down versus JP¥146.06.
In China, the Shanghai Composite fell 0.9%, while the Hang Seng index in Hong Kong was down 1.9% in late dealings.
In a further sign of trouble in China’s property sector, embattled Chinese developer Evergrande Group filed for bankruptcy protection in the US on Thursday, court documents showed, a measure that protects its US assets while it attempts to restructure.
The company’s woes have come to symbolize the growing crisis in China’s sprawling property sector, which accounts for a huge portion of the world’s number two economy, that many fear could spill over globally.
‘[The news] would have prompted some alarm in isolation’, AJ Bell’s Mould commented, ‘but when you combine it with its peer Country Garden’s decision to suspend payments on some of its bonds and the words ’dominos’ and ’falling’ start to come to mind.’
The S&P/ASX 200 in Sydney closed marginally higher.
In addition to the economic and fiscal woes facing global economies, they are grappling with heightened geopolitical tensions in recent months.
US President Joe Biden on Friday will announce new security cooperation at a first-of-a-kind three-way summit with the leaders of Japan and South Korea, hoping to send a message of strength to China, which has already made clear its displeasure.
Biden, South Korean President Yoon Suk Yeo Yoon and Japanese Prime Minister Fumio Kishida will agree to a new three-way crisis hotline and regular military drills and will agree to hold trilateral summits each year, US officials said, hoping to institutionalize the progress.
Meanwhile, Russian and Chinese warships are conducting joint maritime patrols in the Pacific Ocean involving rescue training and drills for countering air strikes, according Moscow’s defence ministry. Additionally, China said Xi Jinping will pay a state visit to South Africa next week, while confirming the president will attend the Brics summit in Johannesburg.
Africa has emerged as a renewed diplomatic battleground, with the West, Russia and China vying for influence amid heightened competition for minerals and international divisions fostered by the war in Ukraine.
Gold was quoted at $1,892.95 an ounce early Friday, little changed from $1,893.44 on Thursday. Brent oil was trading at $84.30 a barrel, lower than $84.68.
Still to come in Friday’s economic calendar, there’s a eurozone inflation reading at 1000 BST.
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