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(Alliance News) - The FTSE 100 sat out a continued post-US inflation rally, though its peers climbed, as a stronger pound put pressure on the index's international earners.
It was an otherwise strong morning for European equities. The pound shook off poor UK data, while euro buyers overlooked a worrying outlook delivered by the European Commission.
The FTSE 100 index was down 25.13 points, 0.3%, at 7,350.21. The mid-cap FTSE 250 jumped 323.10 points, or 1.7%, at 19,700.34, and the AIM All-Share was up 9.48 points, 1.1%, at 851.05.
The Cboe UK 100 was down 0.6% at 734.60, the Cboe UK 250 surged 1.6% to 16,978.15, while the Cboe Small Companies rose 0.1% to 12,697.60.
Stocks on the continent were higher. The CAC 40 index in Paris was up 0.3%, while the DAX 40 in Frankfurt was 0.7% higher.
The pound rose to USD1.1762 on Friday afternoon in London, from USD1.1661 late Thursday. The FTSE 100 is stacked with firms that count earnings in foreign currencies, so a stronger pound can serve as headwind to the index.
Among those lower were brewer Diageo, and tobacco firms British American Tobacco and Imperial Brands. The stocks were down 3.4%, 3.6% and 3.7%.
The pound was on the up despite the prospect of the UK already being in recession.
UK GDP fell 0.2% quarter-on-quarter in the entirety of the third quarter of 2022. GDP had increased 0.2% in the second quarter from the first.
The third-quarter figure was better than the FXStreet cited consensus of a chunkier 0.5% decline.
Though the number from the Office for National Statistics was not as bad as feared, it may suggest the UK is already in recession, as the Bank of England predicted. The long-standing definition for a technical recession is two successive quarterly GDP falls.
The BoE has predicted the nation to enter recession in the fourth quarter of 2022.
"To the surprise of precisely no-one who has been paying attention, GDP figures for the three months to the end of September show the UK economy contracted by 0.2%. Expectation will now build that the UK will have achieved the unwanted technical definition of recession, with a second consecutive quarterly period of negative growth, by the end of the year," AJ Bell analyst Russ Mould commented.
"The market has largely priced in such a prospect and the domestic-facing FTSE 250 index traded higher today despite the economic turmoil. Though the news doesn't make balancing the books any easier for Chancellor Jeremy Hunt ahead of his Autumn Statement given the implied drop in tax revenue."
Against the yen, the dollar slumped to JPY139.59 on Friday afternoon UK time, from JPY141.78 at the time of the London equities close on Thursday. The greenback fell to a roughly three-month low of JPY138.86 earlier on Friday, on the back of Thursday's US inflation miss.
The US consumer price index rose 7.7% in October against the prior year, slowing from the 8.2% rise recorded in September. Market consensus, as cited by FXStreet, had expected for inflation to cool to 8.0% in October, so the actual figure came in shy of forecasts.
"For once talk of a pivot by the Federal Reserve might be more than just hot air, with the easing of inflationary pressures accompanied by signals from some Fed officials they might be prepared to ease up on rate hikes," AJ Bell's Mould added.
The reading had prompted the tech-heavy Nasdaq Composite index to notch its largest-ever daily points rise. The index rose 760.97 points, 7.4%, on Thursday.
Stocks in New York are called higher again on Friday. The Dow Jones Industrial Average is seen adding another 0.4%, the S&P 500 0.5% and the tech-laden Nasdaq 0.6%.
Tech-exposed shares in London also surged. Molten Ventures added 9.8%, among the best FTSE 250 performers. Among its holdings are challenger bank Revolut. Scottish Mortgage Investment Trust rose 2.2%, even after reporting a weaker first-half net asset value. Its holdings include electric carmaker Tesla and pharmaceutical company Moderna.
The euro traded at USD1.0290 midday on Friday, up sharply from USD1.0162 on Thursday. The single currency rose despite a glum forecast by the European Commission.
The EU warned Friday the eurozone was set to fall into recession this winter as Brussels hiked inflation forecasts for 2022 and 2023 on the back of high energy prices.
"The contraction of economic activity is set to continue in the first quarter of 2023. Growth is expected to return to Europe in spring," the European Commission said.
"With powerful headwinds still holding back demand, economic activity is set to be subdued, with GDP growth reaching 0.3% in 2023."
The downbeat forecast came as the commission sharply raised its predictions for inflation in this and next year.
It said eurozone inflation was expected to stand at 8.5% for 2022, a point higher than earlier forecast, and 6.1% in 2023, two points higher than predicted previously.
In London, China exposed stocks were among the best large-cap performers. Asia-focused insurer Prudential rose 9.0% and miner Anglo American added 5.2%.
China announced the relaxation of some of its hardline Covid-19 restrictions on Friday. A notice from the country's disease control agency on Friday said the Politburo Standing Committee – the apex of power in China – met Thursday to rubberstamp limited relaxations.
According to the notice, quarantines for inbound travellers will be cut from 10 days to eight, consisting of five days in a state isolation centre and three days at home.
Inbound arrivals will still be required to undergo six nucleic acid tests and will not be allowed to freely set foot outside during those eight days, the notice says.
Elsewhere, TheWorks.co.uk fell 11%, on the back of a somewhat downbeat outlook statement ahead of the key Christmas trading period.
"We remain cautious with regard to how consumer spending might be affected by external factors such as higher inflation and interest rates during the key Christmas season and the remainder of this financial year," the company said.
Gold rose to USD1,759.84 an ounce midday Friday, from USD1,745.45 late Thursday. Brent oil fetched USD96.44 a barrel, rising from USD93.90.
By Eric Cunha; ericcunha@alliancenews.com
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