Stocks prices in London ended in the red on Friday as a higher-for-longer narrative around interest rates and heightened tensions in the Middle East weighed on market mood.
The FTSE 100 index closed down 97.39 points, 1.3%, at 7,402.14. The FTSE 250 ended down 180.41 points, 1.1%, at 17,032.73, and the AIM All-Share closed down 0.84 of a point, or 0.1%, at 682.93.
Over the past week, they are down 3.2%, 4.5% and 1.8%, respectively.
The Cboe UK 100 ended down 1.4% at 738.73, the Cboe UK 250 closed down 1.0% at 14,780.34, and the Cboe Small Companies ended down 0.9% at 12,821.72.
In European equities on Friday, the CAC 40 in Paris ended down 1.5%, while the DAX 40 in Frankfurt ended down 1.6%.
Stocks in New York were lower at the London equities close, with the DJIA down 0.6%, the S&P 500 index down 1.0%, and the Nasdaq Composite down 1.5%.
US Federal Reserve Chair Jerome Powell left the door open for a new interest rate hike in the US on Thursday as he warned that inflation in the US was ‘still too high’ despite a recent slowdown.
The Fed recently slowed its aggressive campaign of monetary tightening which lifted its benchmark lending rate to a 22-year high, as it looks to slow down inflation without pushing the US economy into recession.
According to CME Market’s FedWatch Tool, traders currently assign a probability of 98% that the Fed will hold its interest rates steady on November 1.
All eyes this week have been on worsening tensions in the Middle East.
Israel is preparing for a ground invasion of Gaza after the October 7 attacks by Hamas. Even since, Israel has been conducting intense bombardments of the enclave in retaliation.
This week, tensions escalated following a massive blast at a Gaza City hospital that killed hundreds, sparking protests across the region.
The conflict has also added to inflation fears, with rising oil prices. Oil prices on Friday were markedly above the $90 mark, as the market remained anxious about supply.
Brent oil was quoted at $93.20 a barrel at the London equities close Friday, up from $91.28 late Thursday.
‘Geopolitical tensions have plainly ratcheted higher this week in both rhetoric and action, which has boosted the oil price and volatility is increasing sharply,’ said Kieran Tompkins, commodities economist at Capital Economics.
‘The Israel-Hamas conflict and geopolitical tensions will remain the key driver of prices in the week ahead.’
Gold prices touched three-month highs on Friday amid increasing demand for safe-haven assets amid the conflict.
Safe-haven gold was quoted at $1,996.01 an ounce at the London equities close Friday, higher against $1,952.66 at the close on Thursday.
In the FTSE 100, gold miner Endeavour Mining closed up 4.4%, on the back of higher gold prices.
Meanwhile, the conflict in the Middle East rattled other shares, notably airlines. Wizz Air fell 0.6% and British Airways parent IAG lost 2.2%.
In New York on Wednesday, United Airlines closed down 9.7%. It was down 2.0% at London’s close on Friday.
The US carrier warned that the suspension of flights to Tel Aviv, and higher jet fuel costs, would drag profit this quarter well below Wall Street’s expectations. United flies the most services to Tel Aviv among US-based airlines, accounting for 2% of the carrier’s annual capacity.
Back in London, InterContinental Hotels Group lost 4.3%.
The England-based operator of the InterContinental, Holiday Inn and Crowne Plaza hotel chains said that demand was ‘very healthy’ during its latest quarter.
IHG’s revenue per room available in the third quarter rose 11% annually and was 13% higher than in the third quarter of pre-pandemic 2019. It exceeded Bank of America’s estimate of a 9% increase.
IHG Chief Financial Officer Michael Glover on Friday said: ‘Looking further ahead, we’re excited about the future for IHG in the attractive long term demand drivers for our markets, despite the macroeconomic uncertainties and some short term financing challenges holding back new hotels development.’
AIM’s Ethernity Networks lost 26%.
The Airport City, Israel-based supplier of data processing semiconductor technology for networking appliances received a settlement notice for $90,000 from 5G Innovation Leaders Fund LLC pursuant to a share subscription agreement announced in late February.
It said 5G Innovation is entitled to issue settlement notices under the agreement despite notifying Ethernity of an event of default and despite Ethernity’s ongoing temporary suspension of proceedings.
The pound was quoted at $1.2156 at the London equities close Friday, up compared to $1.2149 at the close on Thursday. The euro stood at $1.0594 at the European equities close Friday, higher against $1.0576 at the same time on Thursday.
Against the yen, the dollar was trading at JP¥149.84, lower compared to JP¥149.92 late Thursday.
In Monday’s UK corporate calendar, there are trading statements from Shanta Gold and South32.
After a quiet day on Monday, he economic calendar for next week will pick up on Tuesday. On Tuesday there is UK unemployment data at 0700 BST, followed by a slew of PMI data from the EU, Germany, the UK and the US.
Thursday will be a big day for US economic data, with a GDP reading as well as the unemployment insurance weekly claims report.
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