Stocks closed lower on Friday in London as investors looked increasingly risk averse amid an expectation that interest rates will stay higher for longer and clashes continue in the Middle East.
The FTSE 100 index closed down 45.18 points, or 0.6% at 7,599.60 on Friday but finished the week 1.4% higher.
The FTSE 250 ended down 381.47 points, or 2.1%, at 17,454.22 and closed the week down 1.6%.
The AIM All-Share closed down 5.90 points, or 0.9%, at 689.67 and ended 0.7% lower over the past five days.
The Cboe UK 100 ended down 0.6% at 758.81, the Cboe UK 250 closed down 2.1% at 15,159.20, and the Cboe Small Companies ended down 0.8% at 13,161.85.
Bank of England Governor Andrew Bailey said on Friday that the central bank’s policy will continue to be ‘restrictive’.
‘We have made, I think, particularly in the last few months, solid progress in terms of showing signs that inflation is being tackled. But let’s not get carried away because there’s an awful lot still to do.
‘I think many of us now see policy operating in a restrictive fashion and I’m obviously going to have to say that I think that’s what it needs to do,’ Bailey said at the International Monetary Fund’s annual meeting in Marrakech, Morocco.
The events of the last few days in the Middle East were also very much front of mind for investors on Friday.
Thousands of Palestinians fled to southern Gaza in search of refuge after Israel warned them to evacuate before an expected ground offensive against Hamas in retaliation for the deadliest attack in Israel’s history.
The call to get out came six days after Hamas gunmen burst through the heavily militarised border around the Gaza Strip and killed more than 1,300 people.
Israeli Prime Minister Benjamin Netanyahu has vowed to ‘crush’ Hamas, proscribed as a terrorist organisation by the US and Europe.
Against this backdrop, commodity prices surged as markets worried that the Israel-Hamas conflict could impact supply.
Brent oil was quoted at $89.59 a barrel at the London equities close on Friday, up sharply from $86.58 at the close on Thursday. Gold was quoted at $1,922,99 an ounce, significantly higher against $1,871.43 on Thursday.
Oil majors BP and Shell closed 2.1% and 1.5% higher, respectively, as a result, while miners Endeavour Mining and Fresnillo closed up 4.5% and 4.8%.
Elsewhere in the FTSE 100, Next closed down 1.1% after announcing that it will acquire clothing retailer FatFace for £115.2 million.
The Leicester-based clothing, footwear and home products retailer said the acquisition will be paid partly in cash and partly in shares. It added that the purchase will not materially impact its pretax profit in 2023.
Sky News had first reported that Next was lining up FatFace as its latest takeover deal on Wednesday.
Next said it expects the acquisition to be completed within the next few weeks, after which point it will hold 97% of FatFace shares, with FatFace’s management retaining the remaining 3%.
St James’s Place plunged 19%, making it the worst blue-chip performer at the close on Friday, after the wealth manager responded to media reports that it is under pressure to change its fee and charges structures for clients.
SJP said it was continuing to build on the work completed for Consumer Duty, as previously disclosed, which includes an assessment of its fees and charging models.
It added: ‘Whilst the evaluation has not yet been completed and therefore no decision has been made, we are confident that all the options under consideration will ensure value for clients and a strong, secure, and sustainable business for all stakeholders.’
The Financial Times had reported SJP was facing pressure from regulators to change its fee structure, with critics citing ‘opaque and expensive charges’ for financial advice as well as ‘stiff penalties’ for early withdrawals.
In the FTSE 250, Ashmore lost 7.6% after reporting a 7.5% drop in total assets under management in the first quarter of its financial year, as a result of ‘continuing institutional risk aversion’.
The emerging markets-focused investment manager said AuM totalled $51.7 billion at September 30, compared to $55.9 billion at the end of June.
This was the result of a negative investment performance of $1.3 billion and net outflows of $2.9 billion, Ashmore said.
Elsewhere in London, Avon Protection climbed 7.4% after it reported both underlying earnings and its order book grew in its second half, and that its Armour business is on track to be officially discontinued.
The personal protection equipment company said trading in the second half of the year ended September 30 was, as expected, stronger than the first.
Avon Protection said its order book grew by over 10% compared with the previous year, ‘with strong demand for helmets offsetting expected softness’ in demand for respiratory equipment.
Avon said revenue, excluding armour, was significantly above that in the first half of financial 2023, while the adjusted operating profit margin remained ‘broadly flat’.
The company added that all outstanding armour products have now been delivered to customers. Consequently, Avon expects its Armour business to be classified as discontinued for financial 2023, giving it ‘a more profitable and focused business and a stronger platform for future growth.’
In European equities on Friday, the CAC 40 in Paris ended down 1.4%, while the DAX 40 in Frankfurt ended down 1.6%.
Stocks in New York were largely lower at the London equities close, with the Dow Jones Industrial Average up 0.1%, the S&P 500 index down 0.4%, and the Nasdaq Composite down 1.0%.
The dollar, meanwhile, climbed on Friday.
The currency ended the week on the front foot as investors digested Thursday’s hotter-than-expected US inflation print, which showed the US yearly inflation rate was unmoved at 3.7% in September. The rate had been expected to cool to 3.6%, according to FXStreet-cited consensus.
The print reignited fears over the trajectory of interest rates in the world’s largest economy.
The pound was quoted at $1.2135 at the London equities close on Friday, down from $1.2209 at the close on Thursday. The euro stood at $1.0498, lower against $1.0547.
Against the yen, meanwhile, the dollar was trading at JP¥149.66, lower compared to JP¥149.77 late Thursday.
Analysts at ING explained that geopolitical volatility can favour ‘defensive currencies’, leading traders to flee to the safe-haven yen as events in the Middle East continued to unnerve markets.
In Monday’s UK corporate calendar, there are annual results from Seeing Machines and Tristel.
The economic calendar next week has UK employment data on Tuesday, EU inflation data on Wednesday, and the weekly US unemployment claims report on Thursday.
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