The FTSE 100 ended a losing week in the red on Friday as higher oil prices and lingering artificial intelligence spend concern kept investors sidelined.
In London, the FTSE 100 index ended down 34.67 points, 0.3%, at 10,690.36. The FTSE 250 ended 25.68 points higher, 0.1%, at 24,237.39, and the AIM all-share shed 4.26 points, 0.6%, at 746.67.
For the week, the FTSE 100 was down 1.8%, the FTSE 250 was down 1.2% and the AIM all-share lost 3.3%.
In European equity markets on Friday, the CAC 40 in Paris ended down 0.4%, while the DAX 40 in Frankfurt fell 0.8%.
In New York, markets were mixed. The Dow Jones Industrial Average was down 0.8% at the time of the closing bell in London on Friday. The S&P 500 was 0.1% lower but the Nasdaq Composite rose 0.2%.
The Nasdaq stabilised after a torrid trading session on Thursday which saw the index tumble 2.6%, its worst day of losses since July.
Bank of America (BofA) strategists noted: “There are mounting signs of markets becoming increasingly unwilling to fund the AI infrastructure build-out.”
BofA said it remains “concerned about the AI capex outlook, not just because of rising funding costs squeezing incremental returns. We also see scope for competitive pressures, leading to a loss of pricing power, translating into disappointing AI monetisation just as happened during past large-scale capex cycles.”
Adding to the wary mood, Brent headed above 115 dollars per barrel in trading on Friday for the first time since early May on supply concerns caused by the Middle East conflict.
Oil and gas prices have risen strongly this week, adding to worries about high inflation weighing on economic growth around the world.
The gains followed reports earlier this week that the US and Israel may be drawing up plans for renewed attacks on Iran as part of the regional war that started in late February. Iran has countered that it is prepared to strike back as well.
Barclays analyst Emmanuel Cau commented: “Even as Middle East supply has continued to recover, uncertainty over the durability of those flows remains elevated given the volatile geopolitical environment. As a result, investors are increasingly having to contemplate a higher for longer oil backdrop, keeping inflation concerns elevated and maintaining the upward pressure on rates and broader financial conditions.”
Brent was quoted at 116.34 dollars a barrel at the time of the London equity market close on Friday, up sharply from 111.18 dollars at the same time on Thursday.
Trade Nation analyst David Morrison said while a pullback in the oil price is well overdue, there is nothing to stand in the way of higher prices, unless, that is, the US and Iran can reach an accommodation to end their war.
“As things stand this seems very unlikely. Stranger things have happened, but according to US news reports, it sounds as if the Trump administration is preparing to renew attacks on Iran sometime after the US midterms which will be held in less than a fortnight,” he added.
Against the dollar, the euro eased to 1.1196 dollars from 1.1201 dollars. Against the yen, the dollar was trading at 156.85 yen, down from 157.20 yen.
The yield on the US 10-year Treasury was quoted at 5.00%, narrowed from 5.02%. The yield on the US 30-year Treasury was quoted at 5.32%, down from 5.33%.
Back in London, investors weighed a mixed bag of domestic economic data ahead of next week’s Budget.
In the credit column, a report showing the UK private sector grew at a faster pace than expected in October, supported by the fastest rise in new work in more than two years.
The S&P Global flash composite purchasing managers’ index rose to 53.1 points in October, from 52.0 in September. It was the best composite PMI reading in eight months.
But in the debit column, a weaker retail sales print and a drop in consumer confidence.
The Office for National Statistics said retail sales volumes fell 0.4% in September from August, compared with a smaller 0.1% decline forecast, according to FXStreet.
While GfK’s long-running consumer confidence index fell 11 points in October, reversing a slow recovery in recent months. It now sits firmly deeper in negative territory at minus 24 points.
The index had previously seen three consecutive monthly increases.
All measures decreased compared with September’s figures, but the largest declines were seen in the major purchase index – an indicator of confidence in buying big ticket items – and expectations for the general economy over the next 12 months. Both fell 14 points against September.
The pound was quoted at 1.3376 dollars, up from 1.3365 dollars. Against the euro, sterling climbed to 1.1946 euros from 1.1933 euros.
On the FTSE 100, the oil price gains boosted BP, Ithaca Energy and Shell, up 4.4%, 3.9% and 3.7% respectively. BP and Shell report third quarter results next week.
Smith & Nephew (S&N) firmed 1.7% after the Financial Times reported it came close to combining with Johnson & Johnson’s DePuy Synthes orthopaedics unit, but discussions fell apart over a leadership disagreement.
The FT said talks “collapsed at the last minute” after Watford-based medical technology firm S&N refused to allow former chief executive Namal Nawana to lead the combined business. The company instead favoured current chief executive Deepak Nath, the FT’s sources said.
Rolls-Royce led the blue-chip fallers, down 7.6%, weighed by the current geopolitical uncertainty, the high jet fuel price environment and an underwhelming response to earnings from French peer Safran, which fell 10%. Fellow aerospace firm Melrose Industries was off 4.7% in London.
Analysts at Citigroup said Safran reported an in line set of numbers with guidance reaffirmed, albeit sell-side has been expecting further upgrades.
“In a market where the mood has shifted negatively more recently, the shares may be slightly soft on this,” the broker added.
Elsewhere, technology jitters put Computacenter on the back foot, down 5.0%, while weak results from French luxury goods firm Kering sent Burberry down 4.3%. Kering, which owns fashion brand Gucci, plummeted 17%.
On the FTSE 250, Wag Payment Solutions fell 4.2% as TA Associates sold its remaining 13% stake in the payment and data services provider.
TA Associates initially invested in Eurowag back in 2016 and helped take the business public through an initial public offering on the London Stock Exchange in 2021.
Gold was quoted at 3,996.30 dollars an ounce, down from 4,054.71 dollars.
The biggest risers on the FTSE 100 were BP, up 26.60p at 638.50p, Ithaca Energy, up 11.20p at 300.80p, Shell, up 144.50p at 4,033.00p, Compass Group, up 0.59p at 33.94p and Smith & Nephew, up 19.00p at 1,153.00p.
The biggest fallers on the FTSE 100 were Rolls-Royce Holdings, down 95.40p at 1,164.20p, Fresnillo, down 153.00p at 2,309.00p, Diploma, down 370.00p at 6,890.00p, Computacenter, down 240.00p at 4,590.00p and Melrose Industries, down 22.40p at 452.60p.
Monday’s local corporate calendar has full-year results from Quadrise. Later in the week, third quarter updates are due from AstraZeneca, GSK, BP, Shell, HSBC, Lloyds Banking Group and Unilever, amongst others.
Monday’s global economic calendar has the Ifo business climate report in Germany. Later in the week interest rate decisions are due in the US, Europe, Japan and Canada.
Contributed by Alliance News