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(Alliance News) - The FTSE 100 once again outperformed peers on Friday, though it still ended lower as investors continue to fret over inflation and the prospect of a looming US interest rates hike.

Despite an underwhelming session and markets generally closing out the week in a low ebb, London's blue chip index posted a weekly gain. Advances for oil stocks and banks contained the FTSE's decline on Friday.

Over in New York, meanwhile, the banking earnings season kicked off with a whimper, as JPMorgan and Citi failed to impress. Shares in Wells Fargo climbed, however.

The FTSE 100 ended down 20.90 points, 0.3%, at 7,542.95. The mid-cap FTSE 250 index closed down 215.13 points, or 0.9%, at 22,743.35. The AIM All-Share index fell 11.87 points, or 1.0%, at 1,159.87.

The FTSE 100 added 0.8% this week, though the FTSE 250 fell 2.6% and the AIM All-Share lost 2.3%.

The Cboe UK 100 index closed down 0.3% at 748.62 points. The Cboe 250 ended down 1.0% at 20,342.83, and the Cboe Small Companies lost 0.1% to 15,727.98.

The CAC 40 stock index in Paris closed down 0.8%, while the DAX 40 in Frankfurt shed 0.9%.

"It's been another choppy week for European equity markets with weakness in US equity markets bleeding into a negative end to the week, as speculation about the pace of US rate rises keeps investors on edge," CMC Markets analyst Michael Hewson commented.

"The FTSE 100 has continued to outperform and looks set to close higher for the fourth week in a row, despite today's underwhelming close, unlike the FTSE 250 which has underperformed year to date, like the rest of Europe's markets."

Hewson noted Frankfurt's DAX struggled after numbers revealed Germany's economy ended 2021 on a downbeat note. Gross domestic product shrank in the last quarter of 2021, by up to 1% compared to the previous quarter, Destatis said.

Destasis will not release its fourth quarter figures until the end of the month, but estimated that the economy may have shrunk by between 0.5 and 1% compared to the third quarter.

The pound was quoted at USD1.3675 at the London equities close on Friday, down from USD1.3738 at the same time on Thursday.

The pound was weaker despite decent UK economic data. UK GDP advanced 0.9% in November from October, accelerating from month-on-month growth of 0.2% in October. The November print beat the market estimate, cited by FXStreet, of 0.4% growth. The ONS said the monthly figure for GDP is estimated to be above its pre-coronavirus pandemic level of February 2020 for the first time.

However, the figures represented the state of the UK economy prior to the impact of the Omicron variant of Covid-19.

The dollar had a mixed end to a difficult week.

The euro was priced at USD1.1423, down from USD1.1471. Against the Japanese yen, the dollar was trading at JPY113.82, down from JPY114.05.

ThinkMarkets analyst Fawad Razaqzada commented: "The Federal Reserve is getting worried the rapid rise in inflation and signs it is not going to ease back towards the 2% goal any time soon. Multiple officials have come out this week to speak about inflation and the Fed’s monetary policy response, ahead of their January meeting blackout period. They have made it quite clear that interest rates are very likely to start going up from March. In 2022, there will likely be 3 or even 4 hikes.

"Yet, the dollar hasn't exactly been surging in response. The greenback fell back this week amid concerns that omicron and high levels of inflation is going to hurt the world’s largest economy. But with the Fed growing more hawkish after being head and shoulders above the likes of the BoJ and ECB in terms of its readiness to start policy tightening, the downside risks for the dollar should be limited going forward."

Equities in New York were weaker at the time of the closing bell in London. The Dow Jones Industrial Average was down 0.9%, the S&P 500 down 0.6%, and the Nasdaq Composite 0.3% lower.

JPMorgan fell 5.7%, while Citi was down 2.7%.

For the fourth quarter to December 31, JPMorgan posted revenue of USD29.26 billion, down slightly from USD29.34 billion in the fourth quarter of 2020.

Fourth quarter net income was USD10.40 billion, or USD3.33 per diluted share, down from USD12.14 billion, or USD3.79, the year before.

Citi said total revenue for the fourth quarter of 2021 was up 1.0% to USD17.02 billion from USD16.83 billion a year before. However, thanks to significantly increased operating expenses up by 18%, net income narrowed by 26% to USD3.17 billion from USD4.31 billion.

Wells Fargo reported fourth-quarter revenue of USD20.86 billion, up from USD18.49 billion the year before. Fourth quarter net income up to USD5.75 billion, or USD1.38 per diluted share, from USD3.09 billion, or USD0.66 per diluted share, a year ago.

The stock was up 3.4%.

London-listed banking stocks, meanwhile, had a strong session. Standard Chartered rose 2.3%, while Lloyds advanced 1.9%.

Rising oil prices lifted BP. The oil major added 0.8% on Friday. The stock has now risen for nine sessions in succession, gaining 18% during this run.

Brent oil was quoted at USD85.56 a barrel late on Friday, up from USD84.80 late Thursday. Gold stood at USD1,818.19 an ounce, up against USD1,817.65.

Back in London, Royal Mail shares fell 5.5%, the worst large cap performer.

"Royal Mail shares have also slipped back after being placed on negative catalyst watch by JPMorgan Chase, on concern over higher costs, and ahead of its annual wage round," CMC's Hewson added.

JPMorgan lowered its price target for Royal Mail to 768 pence from 777p.

Currys ended down 6.9%, after the electrical goods seller broke a string of positive Christmas trading updates by UK retailers.

Currys said the technology market was challenging over Christmas, with uneven customer demand and supply disruption.

For the 10 weeks that ended January 8, group like-for-like revenue fell 5% compared to growth of 4% two years before.

London's junior AIM market struggled to find its groove on Friday, not helped by hefty share price declines for online retailers. ASOS and boohoo, among AIM's biggest listings, closed down 7.0% and 11%. The duo returned gains from Thursday.

ASOS on Thursday revealed plans to move to the London Main Market after more than two decades in the junior market.

Monday's economic calendar has China GDP, retail sales and industrial output figures overnight. The Bank of Japan's monetary policy meeting starts. In the US, financial markets will be closed to mark Martin Luther King Day.

The local corporate calendar has a fourth quarter operations update from miner Rio Tinto, and trading updates from housebuilder Taylor Wimpey and emerging markets asset manager Ashmore Group.

By Eric Cunha; ericcunha@alliancenews.com

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