(Alliance News) - It was a lower end to a turbulent week for stocks in London on Friday, with the key issues dominating the past few days - inflation and the US debt ceiling - likely to ensure uncertainty persists into next week as well.
The FTSE 100 index closed down 59.35 points, or 0.8%, at 7,027.07 on Friday - registering a fall of 0.3% for the week overall.
The FTSE 250 ended down 55.52 points, or 0.2%, at 22,975.77, and has tumbled 2.7% over the week-to-date. The AIM All-Share closed down 12.69 points, or 1.0%, at 1,231.13, and has fallen 2.8% since the start of the week.
The Cboe UK 100 ended down 1.2% at 697.22, the Cboe UK 250 closed down 0.5% at 20,805.43, and the Cboe Small Companies ended down 0.4% at 15,602.06.
In European equities on Friday, the CAC 40 in Paris ended flat, while the DAX 40 in Frankfurt ended down 0.7%.
"Investors remain concerned about rising energy prices acting as a brake on the wider recovery story, and they should be with European natural gas prices showing little signs of slowing down as they continue to move to new record highs," said Michael Hewson, chief market analyst at CMC Markets.
While Brent oil softened to be quoted at USD78.44 a barrel at the London equities close Friday from USD78.50 late Thursday, it continues to trade around its best levels for three years.
A rise in oil prices this week - with Brent at one point topping USD80 a barrel - has seen fears over runaway inflation re-emerge.
Hewson added: "Nonetheless, while we've got off to a poor start, we have pulled off the lows of the day, which suggests that while there is concern about the outlook, it's not significantly higher than it was earlier this week, as markets continue to search for direction."
Traders will continue to eye developments in Washington, nervously eyeing an October 18 deadline to raise the US debt limit.
Congress on Thursday managed to pass a stopgap bill with support from both parties for Biden's signature to avert a damaging government shutdown at midnight – when the fiscal year ends. But uncertainty remains as the US edges nerve-janglingly close to defaulting on its USD28 trillion debt.
Usually raising the debt ceiling is not a complicated issue, with Congress painlessly increasing the limit. This year, though, Republicans are refusing to join Democrats in granting authorization, while Democrats argue they should not have to bear responsibility alone.
No one in the leadership of either party has spelled out a clear way to avoid the crisis, which would tank the US economy and roil world markets.
The policy uncertainty merely adds to market jitters over inflation, brought into focus on Friday by data from the US and eurozone.
On an annual basis, the US personal consumption expenditure index rose 4.3% in August, ticking up from a 4.2% rise in July. The reading beat the market forecast, cited by FXStreet, of 3.9% and was the largest increase since 1991.
The core PCE index, which excludes food and energy, rose 3.6% in August, the same pace in July, amid signs of stabilisation after an inflationary surge. Core PCE is the Federal Reserve's preferred gauge of inflation.
Over in the eurozone, the annual inflation fate accelerated to 3.4% in September, from 3.0% in August. The flash reading came in above forecasts of 3.3%, according to consensus cited by FXStreet.
Cost price inflation was blamed as one of the reasons behind a slowdown in manufacturing growth in the single currency bloc on September.
The IHS Markit eurozone manufacturing purchasing managers' index stayed above the 50.0 threshold in September, suggesting growth continued. However, September's tally fell to 58.6, down from August's 61.4 points. September's number also was below the flash estimate of 58.7 points.
Production, new orders and employment numbers all increased, Markit said, though "acute inflationary pressures" persisted.
The UK also saw an easing in manufacturing expansion, with the PMI falling to 57.1 points in September from 60.3 registered in August. Production schedules were disrupted by a combination of input shortages, longer supplier lead times, and capacity constraints, Markit explained.
The pound was quoted at USD1.3550 at the London equities close Friday, higher compared to USD1.3495 at the close on Thursday. The euro firmed to USD1.1592 at the European equities close, against USD1.1584 at the same time on Thursday.
Against the yen, the dollar fell to JPY111.06 from JPY111.50 late Thursday.
Gold was quoted at USD1,757.98 an ounce at the London equities close Friday, softening from USD1,760.78 at the close on Thursday.
Stocks in New York were in rebound mode at the London equities close, with the Dow Jones up 0.6%, the S&P 500 index up 0.3%, and the Nasdaq Composite flat.
This week has seen tech stocks in the US underperform amid rising bond yields as traders eye the roll-back of pandemic stimulus measures.
In London, Scottish Mortgage Investment Trust - which holds investments in tech stocks such as Amazon.com and Tesla - ended down 3.1% on Friday.
Elsewhere in London, shares in AO World dived 24% as it warned profit will fall this year with sales volumes constrained by supply chain disruption and a shortage of delivery drivers.
Adjusted earnings before interest, tax, depreciation and amortisation in the 2022 financial year, which ends March 31, are expected to be between GBP35 million and GBP50 million, AO said in a trading update. That's down from GBP64 million in financial 2021.
"Whilst we continue to see industry-wide issues relating to ongoing supply chain disruption, we have implemented measures to help mitigate these challenges in our logistics operations," the company said.
Rival electrical appliance retailer Currys, which operates both online and on the high street, closed down 8.6% in a negative read-across.
JD Wetherspoon advanced 2.5% despite its annual loss widening sharply. Pretax loss before exceptional items for the financial year that ended July 25 widened to GPB167.2 million from GBP44.7 million the year prior.
However, Chair Tim Martin said the firm was "cautiously optimistic" about the year ahead. Reporting on current trading, the pub operator said like-for-like sales in the first nine weeks of the current financial year were 8.7% lower than the same weeks in August and September 2019 - before the pandemic started.
Euromoney Institutional Investor topped the FTSE 250, rallying 7.7% on a better than forecast performance in its recent ended financial year.
The mid-cap events and financial information company said it expects adjusted pretax profit for the full year ended September 30 to be significantly ahead of analysts' expectations. This reflects continuing strong growth in subscriptions in Pricing, Data & Market Intelligence, especially People Intelligence, and the continuing turnaround in Asset Management.
The corporate calendar for Monday has full-year results from commercial flooring manufacturer and distributor James Halstead, residual oil technology licensor Quadrise Fuels and plastic products supplier Coral Products.
In Monday's economic calendar, there are US factory orders at 1500 BST. Markets in mainland China will remain shut for the National Day holiday.
By Lucy Heming; lucyheming@alliancenews.com
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