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(Alliance News) - Stocks in London ended a poor week on a sour note Friday, with investors worried over a warning from the EU's chief Brexit negotiator Michel Barnier and data signalling Europe's recovery from the coronavirus is cooling.
Barnier claimed Friday he was "disappointed and concerned and surprised" by the lack of progress in trade talks between the UK and EU.
The EU and UK traded blame for the lack of progress after the latest round of post-Brexit trade talks, with Brussels warning that a deal looked unlikely. Barnier lodged his warning at the close of the seventh round of trade talks, which again got stuck on key issues, mainly fishing rights and competition rules.
"Those who were hoping for negotiations to move swiftly forward this week will have been disappointed," Barnier told reporters after the talks ended.
"And, unfortunately, I too am frankly disappointed and concerned and surprised as well," he added.
His UK counterpart David Frost countered that Brussels' insistence that London meet EU demands on state aid and fisheries policy before work on other areas made it "unnecessarily difficult to make progress". Frost reiterated that he thought a deal remained possible and was Britain's aim but he warned: "It is clear that it will not be easy to achieve."
Barnier said that "too often this week it felt as if we were going backwards rather than forwards."
"At this stage an agreement between the UK and EU seems unlikely," Barnier said.
In London, FTSE 100 index closed down 11.45 points, or 0.2%, at 6,001.89, recovering from an intraday low of 5,948.80. The large-cap index lost 1.8% this week.
The mid-cap FTSE 250 index added 81.25 points, or 0.5%, to finish at 17,577.68, and the AIM All-Share index ended down 0.1% at 956.96.
The Cboe UK 100 index closed down 0.3% at 597.12. The Cboe 250 added 0.2% at 14,918.56, and the Cboe Small Companies closed down 0.4% at 9,576.63.
In mainland Europe, the CAC 40 index in Paris lost 0.3%, while the DAX 30 in Frankfurt gave back 0.5%.
IG chief market analyst Chris Beauchamp said: "FTSE investors should perhaps be grateful for the fall in sterling today, for had it not taken place the FTSE 100's performance would have been even more miserable. It looks like the UK and EU are still unable to make progress towards a deal, sources on both sides pointing to a lack of agreement in key areas. Faced with this, it is not surprising that the strong UK retail sales number has been forgotten. At such a perilous moment, the UK can ill-afford a rupture with its closest and most important trading partners."
The pound was quoted at USD1.3090 on Friday afternoon, down from USD1.3160 at the London equities close Thursday, surrendering early gains that had pushed the UK currency above the USD1.32 mark after negative Brexit headlines from Brussels.
Business activity across the UK continued to gain traction in August, growing at its fastest pace since 2013, according to the latest figures from IHS Markit on Friday.
Markit said UK private sector companies reported a sharp and accelerated increase in business activity during August. Both the manufacturing and service sectors are continuing to experience a recovery in customer demand, Markit noted.
The UK composite output index registered 60.3 in August, up from 57.0 in July. The August print signalled the fastest rate of business activity expansion since October 2013.
SpreadEx analyst Connor Campbell said: "The FTSE and pound alike were also both undermined by the rising number of Covid-19 outbreaks in the UK, with people in Oldham, Blackburn and Pendle banned from socialising with anyone outside their household from midnight on Saturday."
The euro was changing hands at USD1.1785 at the London equities close Friday, down from USD1.1849 late Thursday, after data showed business activity growth across the eurozone slowed in August.
The flash Eurozone purchasing managers' composite output index declined to 51.6 in August, compared to July's final reading of 54.9 in July, mainly driven by a drop in the services sector and a dip in manufacturing.
The flash Eurozone services PMI activity index dropped to 50.1 in August from 54.7 in July, while the flash Eurozone manufacturing PMI index was 51.7 compared with 51.8 the month before.
IHS Markit said its PMI reading signalled a slowdown in the pace of output growth, following the first expansion of activity in five months shown in July.
Service providers reported broadly unchanged levels of business activity from that seen in July, but manufacturing production rose sharply, with the rate of growth accelerating to the fastest rate since April 2018, IHS Markit added.
By country, growth in Germany remained solid, reporting a modest slowdown from July. The flash Germany PMI composite output index dipped in August to 53.7 from 55.3 in July. Although the services PMI dropped to 50.8 from 55.6, the manufacturing PMI rose to 53.0 from 51.0.
In France, the flash composite output purchasing managers' index in August was 51.7, falling from 57.3 in July, but remained above the neutral 50.0 mark. The flash France manufacturing PMI declined back into contraction with a 49.0 reading in August from the final reading of 52.4 in July, while the flash services activity index dropped to 51.9 from 57.3.
In London, GVC Holdings added 5.1% to close at 768.20 pence after Jefferies raised its price target on the gambling firm to 1,250 pence from 1,210p and reiterated its Buy rating.
At the other end of the of the FTSE 100, DCC lost 1.9% after Barclays downgraded the Irish support services firm to Equal Weight from Overweight, saying there is little upside to the company's shares with growth from acquisition activity muted over the last two years.
Barclays analyst Jane Sparrow highlighted DCC's M&A activity has been more subdued than expected since its 2018 equity placing and organic growth in recent years appears to be tracking below management's long-term guidance.
DCC targets that around one-third of overall profit growth is organic and not from newly acquired companies.
In the FTSE 250, HgCapital Trust added 8.8% after it said manager Hg led a further majority investment in Oslo-based software and technology provider Visma, valued at USD12.2 billion, in the world's largest-ever software buyout.
HgCapital Trust will be investing in Visma alongside other institutional clients of Hg through the Hg Saturn 2 fund, while Hg's Genesis 7 Fund will reduce its holding in Visma.
HgCapital Trust will be investing GBP17.1 million in Visma, bringing its existing investments in the company to GBP268.8 million. This will represent a 35% uplift of GBP69.1 million or 17 pence per share over the carrying value of GBP199.7 million in the net value asset of HgCapital Trust.
In commodities, Brent oil was quoted at USD43.84 on Friday evening, lower from USD44.64 at Thursday's equities close in London. Precious metal gold was quoted at USD1,941.70 an ounce Friday evening, down from USD1,946.90 late Thursday.
Against the yen, the dollar was trading at JPY105.89 in London, flat from JPY105.86.
Stocks in New York were green at the London equities close on Friday, with positive data helping improve sentiment. The DJIA was up 0.3%, the S&P 500 index was 0.1% higher, and the Nasdaq Composite was up 0.3%.
For August, the flash US services PMI rebounded from 50.0 to 54.8, with its manufacturing counterpart up from 50.9 to 53.6, both readings coming in notably higher than forecast. On top of that, existing home sales surged to 5.86 million, a huge increase on the previous month's 4.7 million, and well above the forecast 5.4 million.
Spreadex's Campbell said: "The hat-trick of data-beats helped the Dow Jones eke out a 0.2% increase, which sounds pretty pathetic until you look at the losses incurred in Europe."
In the economic calendar next week, highlights include a German GDP print on Tuesday at 0700 BST, with US consumer confidence in the afternoon 1500 BST. On Thursday, there is a US GDP reading at 1330 BST, with the Jackson Hole central banking symposium also kicking off.
A busy Friday sees UK Nationwide housing prices at 0700 BST, eurozone consumer confidence at 1000 BST, German inflation at 1300 BST and US core personal consumption expenditures at 1330 BST.
The UK corporate calendar on Monday sees blue-chip distribution and services firm Bunzl issue half-year results, while mineral sands company Base Resources and construction firm Henry Boot will also publish half-year results. Clipper Logistics and home shopping firm Studio Retail Group will both release full-year results.
By Paul McGowan; paulmcgowan@alliancenews.com
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