Stocks in London closed in the red on Friday following a gloomy week of central bank rate rises and downbeat outlooks.
‘There will be more than a few investors rather glad that today's Friday. Fragile is a word that's been used quite a bit to describe sentiment following a slew of central bank rate rises and disappointing outlooks,’ said Danni Hewson, AJ Bell financial analyst.
The FTSE 100 index closed down 115.33 points, or 1.5%, at 7,387.94 on Friday. Over the week as a whole, the blue-chip index dropped 2.1%.
The FTSE 250 ended down 270.29 points, or 1.4%, at 19,819.67 - shedding 4.3% over the week-to-date - and the AIM All-Share closed down 16.35 points, or 1.7%, at 977.42, declining 4.4% over the course of the week.
The Cboe UK 100 ended down 1.3% at 738.02, the Cboe UK 250 closed down 1.2% at 17,517.23, and the Cboe Small Companies ended down 1.1% at 14,842.43.
In European equities on Friday, the CAC 40 in Paris ended down 1.7%, while the DAX 40 in Frankfurt ended down 1.6%.
At the end of a central bank-heavy week, sentiment was knocked further on indications the European Central Bank could hike interest rates this summer.
In a speech in Paris, Francois Villeroy de Galhau, president of France's central bank and a member of the ECB's governing council, said an end to negative rates would be ‘reasonable’ by the end of this year.
‘Barring unforeseen new shocks, I would think it reasonable to have entered positive territory by the end of this year,’ he said.
ECB chief Christine Lagarde has said that she sees ‘a strong likelihood’ that the bank will hike rates before 2022 ends, if inflation in the eurozone doesn't abate.
The euro stood at $1.0576 at the European equities close Friday, firm against $1.0516 at the same time on Thursday.
Over in the US, traders appeared to shake off the Fed's dismissal of a 75 basis point hike to price in a 85% chance the central bank carries out a three-quarter-point hike next month.
Supporting hawkish expectations was data on Friday showing the US economy added more jobs than expected in April despite surging inflation and fears of a growth slowdown.
The US economy added 428,000 jobs last month, the same as a downwardly revised 428,000 jobs in March. The April print was above the market forecast, cited by FXStreet, of 391,000. The March figure previously was reported at 431,000.
Average hourly earnings rose by 5.5% on an annual basis in April, slowing slightly from the 5.6% reported for March.
‘Overall, with labour market conditions still this strong - including very rapid wage growth - we doubt that the Fed is going to abandon its hawkish plans because of the current bout of weakness in equities,’ commented Paul Ashworth, chief US economist at Capital Economics.
Stocks in New York were in the red at the London equities close, with the DJIA down 0.6%, the S&P 500 index down 0.5%, and the Nasdaq Composite down 0.7%.
In London, weighing on the FTSE 100 was British Airways parent International Consolidated Airlines, tumbling 8.3%. IAG said it expects to post an annual profit, but the stock was hit by plans to moderate capacity.
For the three months ended March 31, IAG reported an after-tax loss of €787 million, narrowed from €1.07 billion in the first quarter last year, as total revenue more than tripled to €3.44 billion from €968 million. On a pretax basis, IAG's loss narrowed to €916 million from €1.22 billion a year before.
As such, IAG said it expects to be profitable from the second quarter onwards and for the full year of 2022.
However, IAG said its British Airways arm is ‘focusing on improving operations and customer experience. This includes ’moderating planned capacity at Heathrow‘.
Other airline stocks in London were hit in a negative read-across. Jet2 fell 4.0% and easyJet shares declined 1.4%.
Property portal Rightmove ended down 7.5% following data which showed growth in the UK construction sector slowed last month.
The S&P Global-CIPS UK construction purchasing managers' index decreased to 58.2 points in April from 59.1 in March. The print just barely beat the market forecast, cited by FXStreet, of 58.0.
S&P highlighted UK construction companies reported another strong rise in business activity during April, but the speed of recovery lost momentum amid weaker new order gains. Survey respondents noted that higher costs and worries about the economic outlook had started to hinder demand, it said.
Housebuilders such as Barratt Developments, Persimmon and Berkeley Group fell 3.7%, 2.7% and 2.7% respectively.
At the top of the FTSE 250 was 4imprint, surging 18% after raising its full-year outlook, now expecting revenue for 2022 to reach $1 billion and profit to beat the highest market forecasts.
The London-based marketer of promotional merchandise said strong trading has continued in the first four months of the year, with ’excellent demand‘ to result in a ’very strong financial performance‘ for the period.
4imprint said its management has raised expectations for operating profit above the highest analyst forecast, citing revenue volume gains, a more productive marketing portfolio, and stable gross margins, as well as operation gearing concerning costs.
Elsewhere in London, McColl's shares surged 46% before being suspended after being left with ’no choice‘ but to be placed into administration, after the failure of financing talks with lenders.
McColl's has appointed PriceWaterhouseCoopers as administrators, expecting that the firm will sell the business to a third-party purchaser ’as soon as possible‘. The application is expected to be approved at court over the course of Friday, McColl's said.
McColl's on Thursday said it was in discussions regarding potential financing solutions for the business to resolve short term funding issues. Should an outcome not be agreed, it cautioned it was ’increasingly likely‘ that the business would be placed into administration.
The pound was quoted at $1.2355 at the London equities close Friday, recovering slightly from $1.2331 at the close on Thursday. Still, sterling has shed 1.8% over the past week.
Traders were also digesting local elections in the UK. Prime Minister Boris Johnson is facing an angry backlash from local Tories as the party saw key London strongholds fall to Labour while also suffering losses in council elections across England.
Keir Starmer hailed a ’turning point‘ as his party strengthened its grip on the capital, taking the totemic Tory authority in Wandsworth, winning Westminster for the first time since its creation in 1964 and clinching victory in Barnet.
Against the yen, the dollar was trading at JP¥130.34, firm compared to JP¥130.30 late Thursday.
Brent oil was quoted at $112.74 a barrel at the London equities close Friday, up from $110.84 late Thursday. Gold was quoted at $1,886.77 an ounce, up against $1,881.76 at the close on Thursday.
The economic calendar on Monday has a Japanese services PMI, Bank of Japan meeting minutes and Chinese trade data overnight, while eurozone Sentix investor confidence is at 0930 BST.
In Monday's UK corporate calendar, there are trading statements from technology-focused investment trust HgCapital Trust and Tbilisi-based investor Georgia Capital, and first quarter results from oil exploration and production company Kosmos Energy.
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