London's FTSE 100 tumbled on Friday afternoon after Federal Reserve Chair Jerome Powell took centre-stage and put to bed any lingering hope of the central bank's hawkishness easing.
For Powell, getting a handle on rampant inflation is the priority, despite any ‘pain’ it will inflict on American families and businesses. Failure to wrestle prices down from their current 40-year high would be even more harmful, Powell said.
Domestically, meanwhile, there was M&A action for investors to mull over, as well as another price cap hike by UK energy watchdog.
The FTSE 100 index closed down 52.43 points, or 0.7%, at 7,427.31 on Friday, losing 1.6% over the course of the week.
London's flagship index was narrowly higher prior to Powell taking the stage at 1500 BST. But the Fed chief's hawkishness ensured markets went into reverse in the final 90 minutes of the day, leaving the FTSE 100 with its first weekly loss since the week ended July 15.
The FTSE 250 ended down 88.15 points, or 0.5%, at 19,169.72, ending the week 3.6% lower. The AIM All-Share closed down 3.98 points, or 0.4%, at 896.78 - losing 2.5% this week.
The Cboe UK 100 ended down 0.8% at 741.49, the Cboe UK 250 closed down 0.6% at 16,447.37, and the Cboe Small Companies ended down 0.8% at 13,113.87.
In European equities on Friday, the CAC 40 in Paris ended down 1.7%, while the DAX 40 in Frankfurt ended down 2.3%.
Stocks in New York were in the red at the London equities close, with the Dow Jones Industrial Average down 1.6%, the S&P 500 index down 2.0%, and the Nasdaq Composite down 2.5%.
Addressing the annual gathering of central bankers in Jackson Hole, Wyoming, Powell did not hold back or leave room for doubt about the central bank's course, pledging to act ‘forcefully.’
He warned the world's largest economy is likely to slow for a sustained period, and the strong US job market will suffer in order to get prices down - which he called the ‘unfortunate costs of reducing inflation.’
‘Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance,’ he told the gathering.
In the battle to contain red-hot US inflation, which topped 9% in June, the Fed has hiked rates four times, including three-quarter-point increases in June and July - steep moves unheard of since the early 1980s - to the current level of a range of 2.25% to 2.5%.
Powell repeated that another three-quarter point increase could be appropriate at the September policy meeting.
The Fed chief's address came after a key gauge of US inflation slowed in July, according to the Department of Commerce on Friday.
On an annual basis, the US personal consumption expenditures index rose by 6.3% in July, slowing from a 6.8% annual rise in June. The latest print was lower than the market forecast, cited by FXStreet, for 7.4%. The core PCE price index, the preferred gauge of inflation by the Fed, rose by 4.6% in July annually, easing from a 4.8% increase in June. The reading was just below market consensus of 4.7%.
The dollar was mixed on Friday. The pound was quoted at $1.1764 at the London equities close Friday, down sharply from $1.1815 at the close on Thursday. The euro stood at $0.9997 at the European equities close Friday, up against $0.9975 at the same time on Thursday. Against the yen, the dollar was trading at JP¥137.31 late Friday, higher compared to JP¥136.72 late Thursday.
Focus in the UK has been on Ofgem's increase in the energy price cap for households, pushing bills even higher.
The UK energy regulator implored the UK government for more assistance, following its massive price cap hike on Friday, as many households across the country face the prospect of struggling to pay the bills this winter.
Ofgem on Friday said it will increase the annual energy price cap on default tariffs by 80%. From October 1, energy suppliers in Britain can charge up to £3,549 per year for energy bills.
In August 2021, Ofgem set the price cap at £1,277 from October 2021, meaning the cap has nearly tripled over a one-year period.
However, experts at energy consultancy Auxilione warned that the cap could double even from that record high by April next year, hitting £7,263.
In London, Micro Focus skyrocketed 94% after the enterprise software provider agreed to be taken over by Ontario-based OpenText.
Micro Focus' shareholders will receive 532 pence per share, valuing the Newbury, Berkshire-based company, including its debt, at around £5.1 billion.
The price represents roughly a 99% premium to the Micro Focus closing share price of 267.80 pence on Thursday.
Micro Focus said its directors intend to recommend unanimously that shareholders vote in favour of the takeover at a court meeting and the resolutions to be proposed at a general meeting. The transaction is expected to be completed during the first quarter of 2023.
In the FTSE 100, InterContinental Hotels finished 4.4% lower after JPMorgan downgraded the Crowne Plaza and Holiday Inn owner to 'neutral' from 'overweight'.
Elsewhere, Lamprell closed 8.5% higher after Thunderball Investments said its takeover offer for the firm has become unconditional.
The consortium, owned by Blofeld Investment Management Ltd and AlGihaz Holding Closed Joint-Stock Co, as of Friday had a stake of 45.2%.
As it bought another 4.8% stake in Lamprell on Friday, it will now own 50% in the United Arab Emirates-based provider of oil field services.
Thunderball's formal takeover offer from July priced Lamprell at 9 pence per share, which Thunderball said valued the company at £38.8 million.
Brent oil was quoted at $99.59 a barrel at the London equities close Friday, down from $100.48 late Thursday.
Gold was quoted at $1,736.54 an ounce at the London equities close Friday, down against $1,756.33 late Thursday.
In the economic calendar on Monday, UK financial markets are closed for the summer bank holiday. The week picks up pace with unemployment readings from Japan and Germany on Tuesday and Wednesday, respectively, a slew of manufacturing PMIs on Thursday, and the latest US jobs report on Friday.
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