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(Alliance News) - Stock prices in London closed mixed on Friday amid choppy trading ahead of the long Bank Holiday weekend as China responded in kind to fresh US tariffs announced earlier in the month, and the speech by the US Fed chair bolstered expectations of a rate cut.
The FTSE 100 index closed down 0.5% at 7,094.98 Friday. The mid-cap FTSE 250 index closed up 0.2% at 19,236.13. The AIM All-Share index closed 0.3% higher at 871.42.
For the week, the blue chips closed 0.8% higher. The mid-cap index finished up 3.3% and the All-Share 1.6% higher.
The Cboe UK 100 closed down 0.1% at 12,054.80 the Cboe UK 250 up 0.6% at 17,164.49, and the Cboe UK Small Companies down marginally at 10,902.19.
The pound was quoted at USD1.2274 at the London close, up slightly from USD1.2250 late Thursday.
"The markets went a bit haywire this afternoon, flip-flopping all over the place as they tried to process both China's latest retaliatory measures and Jerome Powell's headline speech at the Jackson Hole Symposium," SpreadEx Financial Analyst Connor Campbell said.
Shares across Europe and the US initially fell sharply in response to the news China was slapping tariffs of between 5% and 10% on goods from the US worth USD75 billion.
Beijing made the move after global markets were rattled earlier in August after US President Donald Trump announced plans for further tariffs on USD300 billion of goods from China in addition to the USD250 billion of Chinese goods already hit by duties.
The next move in the months-long trade spat between the two largest global economies took the focus - at first - off the speech at the Jackson Hole Symposium by Federal Reserve Chair Jerome Powell. The speech had consumer market attention all morning as investors were keen to glean all they could from the speech with regards to future US rate moves.
"The Fed chief said the central bank was remaining 'vigilant' and will 'act as appropriate to sustain the expansion' of the American economy", Campbell continued. "The FTSE soon resumed the pace of growth seen during the morning session."
Powell made his comments as he continued to face a barrage of criticism from US President Donald Trump for not cutting US interest rates more dramatically.
The Fed chair emphasised that the US economy is "now in a favourable place". Despite this, he added that given the "significant risks we have been monitoring" - including the ongoing US-China trade war - the Fed "will act as appropriate to sustain the expansion".
According to the closely watched CME FedWatch tool after the speech by Powell, economists currently forecast an 95% probability of a cut to US interest rates to 1.75% to 2.00% in mid September and a 5% chance of a cut to 1.50% to 1.75%. The current interest rate range is 2.00% to 2.25%.
Prior to the speech, economists had forecast a 90% probability of a cut to between 1.75% to 2.00% with a 10% chance of rates remaining unchanged.
The comments by Powell initially saw global markets stage a recovery, before being sent into freefall again by a string of Tweets by Trump.
Shortly after the speech by Powell, however, Trump asked on Twitter "who is our bigger enemy" - Powell or Chinese President Xi Jinping before warning he would be "responding to China's tariffs this afternoon" amid a series of remarks criticising China.
"It was all going swimmingly, until Trump decided to respond with a series of dramatic tweets regarding China," IG Chief Market Analyst Chris Beauchamp said. "The tweets, 'ordering' US firms to seek alternatives to China, prompted a swift reversal in equities, which had been moving higher after a Powell speech that made all the right noises."
On Wall Street, the Dow Jones and S&P 500 were trading 1.3% lower, whilst the Nasdaq was down 1.6%.
"Trade wars are certainly back, and this will no doubt push the Fed towards more accommodative policy," Beauchamp added. "Both the Fed and China are in the president's sights, which means that markets face a volatile few weeks, if not longer. Even a rate cut in September will likely be insufficient to appease the White House, meaning that investors should expect a volatile autumn."
In London, amongst the blue chips NMC Health was at the bottom of the index - down 6.1% - as it handed back some of the 19% gains recorded on Thursday amid delivering a "strong" interim performance and announcing a buyback amid rumours two groups of investors were eyeing taking a large stake in the firm at a premium.
In the mid-cap FTSE 250, Peppa Pig-owner Entertainment One surged 31% after receiving and accepting a GBP3.3 billion all cash takeover offer from US toy maker Hasbro late Thursday.
Under the deal, Action Man and Monopoly-owner Hasbro will pay 560 pence per share for Entertainment One - equivalent to a 31% premium to its average share price over the last month.
Hasbro said the acquisition will advance its position as a global play and entertainment company, adding "beloved" preschool brands to its portfolio.
"The foreign takeovers keep on coming," AJ Bell Investment Director Russ Mould said. "Film and TV producer-to-children's merchandise group, Entertainment One has been seen as a bid target for a long time although all the chatter has focused on a media company being the logical suitor. The fact that we've got toy company Hasbro attempting to buy the business may initially seem somewhat leftfield yet this is a logical tie-up."
"Hasbro is the master of a milking a brand to sell all types of merchandise and so it is the perfect owner of Entertainment One which boasts an ever-increasing portfolio of popular children's brands seen on the screen and on the shelves," Mould added.
"The big question you should now be asking is whether someone else will make a bid for Entertainment now it is in play," Mould added, pointing to the share trading above the Hasbro offer price at 582p per share.
Computacenter closed 1.8% higher after the IT firm reiterated its recently-upgraded guidance for 2019, despite interim profit experiencing a marginal reduction.
For the six months ended June, pretax profit narrowed 2.3% to GBP50.8 million despite revenue jumping 21% to GBP2.43 billion. Computacenter also proposed an interim dividend of 10.1 pence, up 16% from 8.7p the year prior.
Computacenter also reiterated its boosted full year guidance given in late July. At the time, the firm expected 2019 adjusted pretax profit to be "materially ahead" of the GBP127.5 million market expectation.
In the red amongst the midcaps, Metro Bank ended at the bottom of the index - 5.8% lower - after Barclays cut its price target to 350 pence per share from 450p prior whilst also delivering an Underweight recommendation for the challenger lender.
On the AIM market, Adept4 shares more than doubled after announcing an all-share deal to buy cloud technology firm Cloudcoco Ltd. Adept4 expects to issue 218 million shares - equivalent to 49% of its enlarged share capital - to buy Cloudcoco.
Based on Adept4's closing share price on Thursday, this would value the deal at around GBP3 million.
Heavy fuel alternative maker Quadrise Fuels ended 5.5% higher on securing GBP2 million in funding, securing its financial position until June 2020 and allowing it to progress its multiple opportunities. The firm also proposed a open offer to raise a further GBP1.5 million.
Shares in Stilo International, meanwhile, sank 30% after announcing plans to leave the AIM market in order to cut costs.
The move follows the software tool maker reporting it had sunk to a GBP29,000 pretax loss in the first half of the year, down from a GBP42,000 profit the year before.
In mainland Europe, in Paris the CAC 40 equities index ended up 1.1%, while the DAX 30 in Frankfurt ended up 1.2%.
The euro was quoted at USD1.1125, higher compared to USD1.1075 late Thursday.
Gold was quoted at USD1,525.07 an ounce at the London equities close, higher versus USD1,499.20 Thursday.
Brent oil was quoted at USD58.81 a barrel at the London equities close, lower than USD59.77 at the close Thursday.
In a quiet economic calendar on Monday, UK markets are closed for a Bank Holiday and German business climate data are released at 0900 BST. In the US, capital goods orders and durable goods orders figures are published at 1330 BST alongside the Chicago Fed National Activity Index print.
Later in the week, German GDP figures are printed on Tuesday. On Thursday, Germany also delivers unemployment figures and CPI prints.
Thursday will also see the US deliver its own initial jobless claims data alongside GDP figures.
On Friday, Japan releases CPI, industrial production, retail sales and unemployment data. Whilst in Europe, eurozone unemployment and CPI figures are printed ahead of US consumer income and expenditure data.
In UK corporate events on Monday, interim results are expected from oil & gas firm Jadestone Energy, lender Bank of Cyprus, real estate company Raven Property, miner Polymetal and biotechnology firm PureTech Health.
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