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LONDON (Alliance News) - UK equity indices fell for the second consecutive day Friday, as investors reacted to a raft of disappointing macro-economic data from across Europe and the US.

"It appears investors want a risk-free weekend, fleeing the Western indices in droves for the second day in a row," said Connor Campbell, financial analyst at Spreadex. "At this rate, with little on the horizon that could really bring any joy or, at the very least, help soften the commodity-based attrition the index is under, the FTSE could very well fall back under 6000 next week," he added.

The FTSE 100 ended the day down 1.0% at 6,118.28, having fallen 1.9% on Thursday, meaning that it ended the week down 3.7%. The FTSE 250 closed down 0.6% at 16,775.63 Friday and down 2.3% for the week, while the AIM All-Share index closed down 0.6% at 732.42 and down 1.9% for the week.

In Europe, the CAC 40 in Paris closed down 1.0%, while the DAX 30 in Frankfurt closed down 0.7%.

On Wall Street, meanwhile, at the UK stock market close, the DJIA traded down 0.8%, the NASDAQ Composite traded down 0.9%, and the S&P 500 traded down 0.7%.

Earlier Friday, Asian stocks closed lower, with Japanese and Chinese indices shedding between 0.5% and 2.2%.

"It has been an ugly week for equities and an even a worse one for commodities," said Fawad Razaqzada, technical analyst at Forex.com. "Concerns over an imminent rate increase from the Federal Reserve are unnerving investors, while [the] continued soft patch in Chinese data suggests growth in the world’s second largest economy is slowing down more sharply than had been anticipated," he added.

At the UK equity market close, Brent oil traded at USD44.48 a barrel, while West Texas Intermediate stood at USD40.57 a barrel. At the same time last week, Brent traded at USD47.42 a barrel, with WTI at USD44.39 a barrel. Gold, meanwhile, traded at USD1,082.40 an ounce at the UK equity market closing bell Friday, significantly lower than the USD1,087.20 it traded at at the same time last week.

In data released by the Office for National Statistics Friday, UK construction output was shown to have declined for a third straight month in September, defying expectations for an increase and confirmed a sharp slump for the third quarter. Construction output decreased 0.2% from August, when it tumbled 3.4%, revised from a 4.3% fall reported earlier. Economists had expected a 1.5% increase.

Year-on-year, construction output decreased for a second straight month, down 1.6% in September, after a 0.6% fall in the previous month that was revised from a 1.3% decline. Economists had forecast a 0.4% drop. The ONS also said that construction output dropped 2.2% in the third quarter compared to the previous three months, which was same as the preliminary estimate released with the gross domestic output data on October 27.

Still, "weak construction is not a big threat to overall economic growth," said Kallum Pickering, senior UK economist at Berenberg. "Though construction weakness is a serious issue that, over the long-term, will become a limiting factor to economic growth – too few roads or power stations hinders production of goods and services – for the moment these secondary effects are not a big drag on GDP," he added.

Eurozone economic growth, meanwhile, eased marginally in the third quarter, intensifying expectations for additional monetary stimulus from the European Central Bank at its December meeting.

Gross domestic product grew 0.3% from the previous three months, which was weaker than the 0.4% expansion seen in the second quarter, preliminary estimates from Eurostat showed. Economists had forecast growth to remain unchanged at 0.4%. Annual growth improved marginally to 1.6% from 1.5% in the second quarter, but came in slightly weaker than the expected 1.7% expansion.

Eurostat is slated to publish the breakdown of third quarter GDP on December 8.

Friday's GDP figures add further support to the already very strong case for additional policy stimulus from the ECB at its next meeting in December, said Jonathan Loynes, an economist at Capital Economics.

Among the big-four countries, Germany, Italy and Spain experienced slowdown in momentum, while the French economy returned to growth on the back of domestic demand.

Germany, which is the largest economy in the eurozone, rose only 0.3% in the third quarter, slower than the 0.4% growth logged in previous period, due to weak investment and foreign trade. Italy's growth eased to 0.2% from 0.3% seen a quarter ago, while Spain's GDP advanced 0.8%, but below second quarter's 1% growth.

French GDP, meanwhile, climbed 0.3% after stagnating in the second quarter.

"The weaker growth adds to the case for further stimulus in the eurozone but does call into question how effective the policy is at spurring growth, or indeed inflation," said Jasper Lawler, market analyst at CMC Markets.

In the US, retail sales rose less than expected in October, according to a report released by the Commerce Department. The report said retail sales inched up by 0.1% in October, while revised data showed that sales were virtually unchanged in September. Economists had expected sales to climb by 0.3% compared with the 0.1% up tick originally reported for the previous month.

The US Labor Department, meanwhile, said its producer price index for final demand fell by 0.4% in October after sliding by 0.5% in September. Economists had expected the index to rise by 0.2%.

Following the data and at the UK equity market close, the pound traded at USD1.5200, while the euro traded at USD1.0727. Sterling had traded at USD1.5206 at the same time Thursday with the euro at USD1.0759.

At the individual UK stock level, mining stocks were among the leading risers in the FTSE 100 on Friday as they recovered some of the heavy losses posted on Thursday.

BHP Billiton, Anglo American and Rio Tinto were three of just a handful of risers in the blue-chip index, closing up 1.4%, 1.5% and 0.8%, respectively. On Thursday, the three stocks ended the day down 5.0%, 8.7% and 3.0%.

Still, "one day doesn't make a trend," said CMC Markets' Lawler. "Commodities will need to show some solid evidence of at least a short term bottom before equities can chart a course back higher," he noted.

Outsourcing company G4S was the biggest loser in the FTSE 100, closing down 5.4%, after RBC Capital Markets lowered its price target on the stock to 210 pence from 230p, retaining its Underperform recommendation.

"We think most divisions are trading in line with our view - the US is strong, UK and Europe tough," said David Greenall and Andrew Brooke, analysts at RBC. The emerging markets are trading as in the first half, adjusting for some distortion, although regions such as Latin America have been a "bit softer" of late, they added.

"Although we continue to factor in strong [emerging markets] growth, we have slightly tempered our view," the analysts said. "Organic growth has slowed of late, while we continue to have concerns that consensus margin expansion may be too aggressive and is primarily buoyed by business shrinkage," they added.

Engineering company Rolls-Royce Holdings was another big faller in the blue-chip index, closing down 3.1%. The company's price target has been downgraded by both Societe Generale and S&P Capital IQ following its profit warning on Thursday.

On Thursday, the group delivered a comprehensively gloomy outlook for 2016, while tabling plans for a massive restructuring and saying it will be reviewing its dividend policy as it foresees further headwinds its marine and aerospace businesses in 2016.

Auto Trader Group was one of the biggest risers in the FTSE 250, closing up 2.6%. The digital automotive marketplace operator proposed its first dividend since listing and reiterated confidence in meeting its expectations for its full financial year, as it reported a sharp jump in pretax profit in the first half due to a significant reduction in finance costs.

The company proposed a maiden interim dividend of 0.5p following its initial public offering in March.

For the half year to end-September, Auto Trader reported a pretax profit of GBP74.7 million, multiplying from GBP13.1 million a year before, as revenue rose to GBP138.2 million from GBP127.5 million. The leap in profit was primarily the result of a GBP46.2 million reduction in finance costs as Auto Trader benefited from a lower level of debt than under its previous private ownership, and with that debt less expensive.

Luxury shoe company Jimmy Choo, closing up 0.6%, said it has appointed Elisabeth Murdoch as an independent non-executive director. Murdoch, daughter of media tycoon Rupert Murdoch, is currently chair of Freelands Family Investment Group and trustee of the Tate museums.

IMI was one of the heaviest fallers in the FTSE 250, closing down 3.2% at 870.10p, following a number of negative broker ratings changes.

JP Morgan downgraded the engineer to Neutral from Overweight, cutting its price target to 930p from 1,100p, while Societe Generale lowered its recommendation on IMI to Hold from Buy, slashing its price target to 975p from 1,350p. Deutsche Bank retained its Hold recommendation but cut its price target to 1,170p from 1,250p, while UBS kept its Neutral rating on the stock but lowered its price target to 900p from 1,150p.

UK IT infrastructure provider Softcat Friday priced its initial public offering at 240.00p per share Friday, giving it a market capitalisation of GBP472.3 million on joining the stock exchange.

Softcat began conditional dealings Friday, closing up 14% at 274.57p. Unconditional dealings are expected to begin next Wednesday.

Softcat is offering 63.9 million shares at this price in its initial public offering, with a further 9.6 million shares being made available pursuant to an over-allotment option. It expects to raise GBP153.4 million, or GBP176.4 million if the over-allotment option is exercised in full. This offer represents around 32.5% of the company's issued share capital, or 37.4% including the over-allotment option.

In the data calendar over the weekend, the preliminary readings of Japanese third-quarter gross domestic product are released late Sunday, shortly before UK Rightmove house price index information for November at 0001 GMT on Monday. After the UK stock market open, eurozone consumer price index data for October are scheduled to be released at 1000 GMT, with the German Buba monthly report due at 1100 GMT.

The German Buba report is released by Deutsche Bundesbank and contains relevant articles, speeches, statistical tables. It provides a detailed analysis of current and future economic conditions from the bank's viewpoint.

In the US, the Federal Reserve Bank of New York's manufacturing index is expected to be published at 1330 GMT.

Investors will also be keeping a close eye on a speech by European Central Bank President Mario Draghi at 1015 GMT Monday.

In the corporate calendar, FTSE 100-listed housebuilder Taylor Wimpey is joined by FTSE 250-listed Keller Group in releasing a trading update Monday, while mid-cap technical products and services company Diploma is expected to publish full-year results. Also of note, AIM-listed Majestic Wine is due to release half-year results.

By James Kemp; jameskemp@alliancenews.com; @jamespkemp

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