LONDON (Alliance News) - UK stocks have closed mixed once again Friday as investors struggle to make sense of the mixed signals being sent from central banks.
Global investor sentiment has been driven this week by debate over when the world's central banks will make adjustments to their monetary policy programmes. With a growing transatlantic policy wedge being driven between the ECB and the Fed, UK stocks have been caught in the middle. With traders unsure which direction to take, the FTSE 100 has seen the lowest weekly volatility since January.
The FTSE 100 has closed down 0.1% at 6,674.30, the FTSE 250 has closed up 0.3% at 15,187.68 and the AIM All-Share has closed up 0.6% at 817.59.
Having opened Monday at 6,693.44, London's blue chip index has closed Friday at 6,674.30, or 0.3% lower, the tightest weekly range seen since late January. This also marks the third consecutive weekly fall for London's main index.
London's alternative market has continued to remain remarkably resilient to the global central bank debate however. Buoyed in part by the current IPO frenzy, the AIM All-Share has risen more than 1.0% over the week.
Recent AIM listing Applied Graphene Materials, for example, has risen by 40% on Friday, after having already jumped nearly 20% on it's first day of trading. The graphene products company had raised GBP11 million through the placing of 7.1 million shares.
Whitbread was the stand out blue chip winner Friday, the hotel and coffee-shop group closed up 3.0% after receiving an upgrade from JPMorgan to Overweight from Neutral. Analysts see the uptrend in UK economic growth as particularly beneficial to Whitbread's Premier Inn, "given its skew to business travellers."
In a light volume day, TUI Travel led the FTSE 100 fallers. The travel group closed down 7.8% following the news that Norwegian shipping magnate John Fredriksen has sold his entire 5.4% stake at 366p, using the proceeds to increase his stake in its German parent company TUI AG, which owns 56% of Tui Travel.
Mining stocks came under particular pressure Friday, with the FTSE 350 index losing 1.3% over the day as the price of gold continues to slump.
"Gold analysts are becoming extremely bearish on gold as the prospect of Federal Reserve tapering edges closer, cooling demand for an investment haven. The metal is heading for its first annual drop in 13 years with some investors losing faith in gold as a store of value. Bullion slumped 26% this year to USD1,244 an ounce in London, reaching USD1,236 yesterday, the lowest since July 9th," said Spreadex Trader Max Cohen.
The German IFO, a closely watched index of business sentiment, came in at 109.3 for November on Friday, rising from 107.4 in October and beating economist expectations of 107.7. German third-quarter GDP, also released this morning, gained 0.3% in the third quarter, a slowdown in growth from the 0.7% seen in the second-quarter, but in line with expectations.
In a now familiar pattern, data released from elsewhere in Europe disappointed. Italian retail sales showed a monthly decline of 0.3%, from a flat reading previously.
Despite the poor economic data from France, the countries main stock market, the CAC40, has managed to close Friday up 0.6%. Meanwhile the German DAX has closed up 0.3%.
The euro has been in focus this week and largely shrugged off the problems in Italy. The single currency dropped sharply on Wednesday following reports that the ECB is considering taking its deposit rate in to negative territory, which would effectively mean charging banks for not lending out excess funds. The euro dropped briefly below USD1.34 in the wake of the news but swiftly rebounded after ECB president Mario Draghi, although agreeing that negative rates were an available tool, said market conditions did not currently warrant such a move. The euro has regained its losses to head in to the weekend trading at USD1.3525.
"Currency strength will exhibit itself at the point of least resistance and we maintain that until Fed tapering is upon us, that EUR/USD will remain well supported in spite of the dovish threats of the ECB," says Rabobank Senior FX Strategist Jane Foley.
The pound has remained flat against the dollar Friday, although closed the week at about USD1.62, having opened at about USD1.62 having been buoyed throughout the week by continued strong UK economic data.
With markets fascinated by central bank policy, investors have been hanging off every word of members of the FOMC, who have been giving mixed signals on when the tapering of asset purchases should begin. The minutes from the latest FOMC meeting that were released on Thursday however gave practically no indication that the central bank will begin scaling back the asset purchases anytime soon, but minutes suggest policy makers are crafting an exit plan. "Many members" of the Federal Open Market Committee "stressed the data-dependent nature of the current asset purchase program, and some pointed out that, if economic conditions warranted, the committee could decide to slow the pace of purchases at one of its next few meetings," the minutes read.
Probable incoming Fed Chair Janet Yellen is also seen to be a supporter of continues Fed intervention. The "mother of all doves," as she has been coined by the market in summary of the perception that she is in no rush to tighten monetary policy, passed a key vote by the Senate Banking Committee this week, 14 votes to 18, to become Fed Chair. Yellen will still have to pass a full Senate vote in the coming weeks.
The Dow Jones index pushed into fresh all time highs above 16,000 earlier in the week on the expectation of continued cheap funding. Like their European counterparts, US stock markets are struggling to push further higher on Friday however. After the European close, the DJIA is marginally higher, holding above the 16,000 level, while the S&P500 is also marginally higher on the day.
Monday should bring a fairly quiet start, before the data calendar heats up later in the week. German import prices will be released before the market open, along with the Nationwide UK house price Index. BBA mortgage approvals data is also out on Monday, while in the afternoon US pending home sales data will be released.
A great weekend to all.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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