Stock prices in London closed the week firmly in red, despite some positive local data, following a series of interest rate hikes throughout the week.
The FTSE 100 index closed down 94.05 points, or 1.3%, at 7,332.12 on Friday. The FTSE 250 was down 305.31 points, or 1.6%, at 18,588.48, and the AIM All-Share was down 5.98 points, or 0.7%, at 822.47.
The Cboe UK 100 closed down 1.2% at 733.57, the Cboe UK 250 down 1.6% at 16,069.95, and the Cboe Small Companies down 1.1% at 12,786.82.
Three gloomy pieces of data rounded off a week in which the US Federal Reserve, the Bank of England and the ECB all raised rates by 50 basis points.
Most positively, survey results showed that the downturn in the UK private sector eased in December, though employment slipped into decline.
The flash composite purchasing managers’ output index rose to a three-month high of 49.0 points in December from 48.2 in November. Any reading under the 50-point threshold signals market contraction.
‘For now, the downturn looks to be relatively mild, and the easing in the rate of decline in December is encouraging news, as is the further marked cooling of inflationary pressures,’ said Chris Williamson, chief business economist at index compilers S&P Global Market Intelligence.
‘However, the fact that the downturn has moderated compared to the turmoil created in the immediate aftermath of the botched ’mini budget’, most notably in financial services, is no real cause for cheer. It is especially worrying to see business confidence and order book indicators remain so low by historical standards, with both of these key gauges signalling heightened degrees of economic stress,’ Williamson said.
Less positively, other data showed retail sales in the UK unexpectedly fell in November against the previous month.
Retail sales volumes are estimated to have fallen by 0.4% in November, after a revised 0.9% rise in October. Market consensus, as cited by FXStreet, had expected a 0.3% increase in November.
Compared with the same period a year earlier, retail sales volumes fell by 5.9% in November. The market had expected just a 5.6% fall.
Finally, Halifax said that it expects UK house prices to fall by 8% in 2023.
The UK housing market was buoyant in the first half of 2022 but flattened off mid-year and, by the year’s end, was falling. The mortgage lender said this downward trend will continue into 2023, with house prices expected to fall next year by around 8%, though it cautioned that forecast uncertainty remains high.
Halifax’s Andrew Asaam said that there is more caution among both buyers and sellers than earlier in the year. House demand has softened as the increasing cost of living hurts household finances and rising interest rates increase monthly mortgage payments.
‘We expect that UK house prices will decrease by around 8% next year. To put this into perspective, such a fall would place the average property price back at roughly the level it was in April 2021, reversing only some of the gains made during the pandemic,’ he said.
On the FTSE 100, Shell closed 1.9% lower.
The oil major won a bid to develop a 760 megawatt offshore wind power project in the Netherlands, alongside Rotterdam-based natural gas producer Eneco Groep.
The new wind farm at Hollandse Kust west lot VI ‘will be delivered through a joint venture called Ecowende and is due to be operational in 2026,’ Shell explained.
Shell’s Wael Sawan, who will be chief executive officer from January 1, said: ‘Through this project we can profitably accelerate the large-scale roll-out of offshore wind in the Netherlands and beyond. This fits well with Shell’s ’powering progress’ strategy to deliver more and cleaner energy to our customers, at home, on the road and at work.’
Rio Tinto ended 0.5% lower.
It completed its acquisition of the remainder of Turquoise Hill Resources for $3.1 billion.
Rio Tinto said this will simplify its ownership of the Oyu Tolgoi mine in Mongolia, strengthening its copper portfolio. Rio Tinto now holds a 66% direct interest in the Oyu Tolgoi project with the remaining 34% owned by the government of Mongolia.
Hollywood Bowl finished 3.5% higher.
The Hertfordshire, England-based ten-pin bowling operator recorded a pretax profit of £46.7 million in the financial year that ended September 30, compared to £462,000 a year before. It beat pre-pandemic pre-Covid financial year 2019 by 69%, for which the firm reported a pretax profit of £27.6 million.
‘We are well positioned to continue to grow our business, supported by our strong balance sheet, highly cash generative business model and our resilience to inflationary pressures,’ Chief Executive Stephen Burns said.
WH Ireland shed 16%. The London-based broker and wealth manager said its pretax loss for the six months that ended September 30 was £384,000 swinging from a profit of £325,000 a year ago.
Chief Executive Officer Phillip Wale said: ‘Our first half was impacted as expected by the fall in markets and drop off in transactions on AIM. In the circumstances, we reported a relatively resilient performance and continued to develop the group through selective recruitment and complementary new services, such as our debt capital markets team who completed another transaction this week.’
In European equities on Friday, the CAC 40 in Paris closed down 1.1%, while the DAX 40 in Frankfurt ended down 0.7%
The euro stood at $1.0601, lower against $1.0637 late Thursday. The pound was quoted at $1.2161 at the close on Friday in London, lower compared to $1.2210 at the close on Thursday.
The safe-haven Japanese yen also was faring well. The dollar was trading at JP¥136.60, down JP¥137.70.
Stocks in New York were lower. The Dow Jones Industrial Average and Nasdaq Composite index both were down 1.4% and the S&P 500 down 1.5%.
Gold was quoted at $1,789.21 an ounce at the close in London, sharply higher against $1,776.01 at the equities close on Thursday. Brent oil was quoted at $78.82 a barrel, down from $81.07 late Thursday.
Next week is a quieter week for economic data, with a US consumer confidence index on Wednesday and UK balance of payments on Thursday. Also on Thursday.
In terms of UK company announcements, there’s half year results from Thruvision Group on Monday and full-year results from Jersey Electricity and Redx Pharma on Tuesday.
By Chris Dorrell, Alliance News reporter
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