LONDON (Alliance News) - The FTSE 100 closed modestly higher Friday, ensuring that the index closed the week in positive territory for the second week in a row, but was prevented from pushing even higher by another disappointing performance by the FTSE 350 life insurance sector index, which ended the day down 2.6%.
Life insurance companies fell sharply in early trading Friday after a report by The Telegraph newspaper revealed that the Financial Conduct Authority plans to launch an inquiry into 30 million policies sold by insurance companies from the 1970s to the turn of the Millennium.
The newspaper reported that regulators will say savers locked into rip-off pensions and investments could be given a free exit or moved to better deals.
At its lowest point, the FTSE 350 sector had lost 7.1% Friday.
However, the sector and its constituents reversed some of their early losses after the FCA confirmed the review in a statement later in the day, giving official guidance on its plans. The regulator said it will try to uncover whether customers are getting the right information and service, as well as whether their investments are appropriate.
"We are not planning to individually review 30 million policies, nor do we intend to look at removing exit fees from those policies providing they were compliant at the time," the FCA said in a statement.
It said it will provides details of its key priorities for the year ahead when it publishes its Business Plan on Monday.
Resolution, Legal & General, Prudential, Standard Life, and Aviva ended the day as the five biggest losers in the blue-chip index, closing down 7.1%, 3.5%, 3%, 2.8%, and 2.7%, respectively. Phoenix Group Holdings was the heaviest faller in the mid-cap index, closing down 12%.
This is the second time in just under two weeks that the UK life sector has been dealt a regulatory blow. Chancellor of the Exchequer George Osborne left annuities providers reeling when he used his 2014 Budget to unveil proposals to give people more flexibility over how they manage their pension pots. Osborne said people will no longer be forced to buy annuities at retirement.
The FTSE 350 life insurance sector has now had almost 6% wiped off its value since before the budget.
Still, following the slight rebound, the FTSE 100 managed to close up 0.4% at 6,615.58, meaning that it closed the week 0.9% higher than it started it. The FTSE 250 closed down 0.1% at 16,181.71, and the AIM All-Share index closed up 0.3% at 850.74.
In Europe, "after the dovish comments from the Bundesbank president suggesting the possibility of quantitative easing in the Eurozone we now find ourselves in ?bad means good? mode," said Jasper Lawler, market analyst at CMC Markets. "Bad European data is being viewed as increasing the chance of QE and moving stocks higher," he added.
Major European bourses outperformed their UK counterparts Friday in spite of some disappointing data from both Germany and France.
French consumer spending grew much less than economists expected in February, figures from the statistical office INSEE showed Friday. Household spending increased just 0.1% from January, when spending declined 2.1%. Economists were looking for a 0.8% gain in February.
Meanwhile, Europe's largest economy revealed that its consumer price inflation rose 1% annually in March, after a 1.2% climb in the previous month, missing economists' expectations of an increase of 1.1%. On a monthly basis, German CPI increased 0.3% in March, following a 0.5% rise in February, again coming in below economists' expectations for a 0.4% rise.
The harmonized index of consumer prices rose 0.9% year-on-year, following 1% increase in February, falling short of the 1% that had been forecast.
The CAC 40 in Paris ended the day up 0.7%, while the DAX 30 in Frankfurt closed up 1.4%.
In the US, Wall Street is also firmly higher. At the close of the UK equity market, the DJIA, S&P 500 and NASDAQ Composite are all up between 0.6% and 0.7%.
In the forex market, "the euro took a hit early doors in Europe on the back of some soft Spanish CPI data," said CitiFX Wire's Jacy Sun.
Spanish consumer price inflation fell 0.2% year-on-year in March, missing economists' forecasts for a flat reading. Harmonized prices also fell 0.2% year-on-year, missing economists' estimates of a 0.1% rise, and recording the first decline since 2009.
With some economists expecting further monetary easing from the European Central Bank to boost the economy and combat disinflation, the euro hit a monthly low of 1.3703 against the dollar in the immediate aftermath of the data, while the pound rose to EUR1.2122 - its highest level since March 6.
However, these losses were more than reversed, following the preliminary CPI numbers from Germany. At the close of the UK equity market, the euro trades at USD1.3747, while sterling trades at EUR1.2097.
In the commodities market, the price of oil rose Friday. "Brent has risen on the back of continued supply outages in Libya and as geopolitical tensions remains high with US President Barack Obama urging Russia to stop "intimidating" Ukraine and reduce its troops around its border," said Fawad Razaqzada, technical analyst at Forex.com.
At the end of the London stock market's trading session, Brent trades at USD107.96 per barrel. West Texas Intermediate trades at USD101.79 per barrel.
At the individual UK stock level, and away from the FTSE 350 life insurance sector index, Anglo American, Glencore Xstrata and Fresnillo were three big risers in the FTSE 100 Friday.
The three mining companies, which were all heavy fallers on Thursday, rebounded strongly. Anglo American closed up 1.5%, Fresnillo closed up 1.2%, and Glencore closed up 2%.
Glencore was further buoyed by the news that RusPetro, a Russian oil and gas company, has signed a further crude oil prepayment facility with Glencore's subsidiary, Glencore Energy UK, for USD30 million. The facility is for a period of one year and requires RusPetro to deliver a minimum of 15,000 metric tonnes, or approximately 1,200 barrels, of crude oil per day to Glencore.
AIM All-Share-constituent Strategic Natural Resources ended the day up 43%. The natural resources development group said that despite the announcement of two legal battles being taken out against the company, talks with a potential strategic investor to help with its recapitalisation struggles are ongoing.
The group overturned some of the 54% loss made on Thursday after it was made aware that it might have to fight two litigation battles in the UK and South Africa.
Kromek Group, closing down 43%, was the heaviest faller on AIM. The supplier of radiation technology to the medical, security and nuclear markets saw its share plummet after it warned that revenues for its current financial year are expected to come in well below expectations due to delays for a large number of contracts, and therefore it no longer expects to be profitable this year.
In the data calendar Monday, Japanese construction orders and housing starts data are released at 0500 GMT. German retail sales numbers are released at 0600 GMT, ahead of the final reading of French fourth quarter GDP at 0645 GMT. UK consumer credit and mortgage approvals data are scheduled for 0830 GMT. Preliminary consumer price inflation readings for Italy and the eurozone are released at 0900 GMT.
In the US, Federal Reserve Chair Janet Yellen gives a speech at 1355 GMT. Soon after, the Dallas Federal Reserve publishes its manufacturing business index survey at 1430 GMT, with the Chicago purchasing managers' index released at 1445 GMT.
On the final day of the UK corporate reporting season Monday, FTSE 250-listed Polymetal International releases full-year results, while KCOM Group provides a trading statement.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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