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(Alliance News) - Blue-chip European equities fell into negative territory by midday on Friday, despite an upbeat start to the session, having initially drawn confidence from a strong end to the week for Asian markets.
Markets have struggled for direction since, and accelerating inflation was in focus once again as consumer prices in the eurozone surged in August.
Companies with an exposure to international travel, meanwhile, were boosted by news of a reform of the UK's traffic light system. However, declines in the mining sector weighed on London's FTSE 100.
The FTSE 100 index was down 20.45 points, 0.3%, at 7,007.03. The large cap index was 0.9% higher shortly after markets opened, but eventually surrendered those gains. It has lost 0.3% so far this week.
However, the mid-cap FTSE 250 index was up 102.84 points, 0.4%, at 23,735.68. The AIM All-Share index was up 7.03 points, 0.6%, at 1,279.17.
The Cboe UK 100 index was down 0.3% at 697.47. The Cboe 250 was up 0.5%, at 21,499.37. The Cboe Small Companies was 0.4% lower at 15,567.99.
In mainland Europe, the CAC 40 index of the largest stocks in Paris and the DAX 30 in Frankfurt were both 0.3% lower.
The pound was trading at USD1.3788 on Friday afternoon, up from USD1.3765 late Thursday. Sterling slipped from USD1.3813, however, an intraday high it hit despite official statistics showing a fall in UK retail sales.
Retail sales declined 0.9% in August from July, confounding expectations of 0.5% growth, according to market consensus cited by FXStreet. In July, they had declined by 2.5% from June.
Annually, retail sales were flat, missing expectations of 2.7% growth.
"August is often dubbed the silly season with many sectors slowing down as the country enjoys a bit of a holiday. After months of restrictions, the data suggest that consumers took every opportunity to get out and socialise and that's had a knock on to retail sales. People needed to buy less food and drink in store because they were enjoying having someone else do the cooking. Restaurants and takeaways profited as did forecourts as people filled up to get out, although fuel sales are still struggling to get back to pre-pandemic levels," AJ Bell analyst Danni Hewson commented.
The euro stood at USD1.1782, improved from USD1.1762 late Thursday. Against the yen, the dollar was trading at JPY109.95, up from JPY109.65.
Consumer price inflation in the euro area accelerated in August, according to figures from Eurostat. The eurozone annual inflation rate was 3.0% in August, picking up pace from 2.2% in July.
Capital Economics analyst Jack Allen-Reynolds noted: "Rising costs – from shipping to energy – are likely to push euro-zone inflation up even further in the coming months. They might also mean that it doesn't fall quite as quickly next year as we currently assume. But by the end of 2022, we still suspect that inflation will be a long way below the ECB's target."
In the UK, consumers expect inflation to stay firmly above the Bank of England's 2.0% target over the coming years, survey results showed.
The inflation rate will sit at 3.0% in five years time, according to the median response to August's Bank of England/Kantar inflation attitudes survey. In the May survey, the median prediction was 2.7%.
Equity markets in New York were pointed to a weak start, in a quiet day on both the corporate and economic fronts.
The Dow Jones Industrial Average, S&P 500 and Nasdaq Composite were called 0.2% lower.
Next week's US company calendar is a bit more stacked, with quarterly results from Adobe on Tuesday as well as Costco Wholesale and Nike on Thursday. Meanwhile, on Wednesday, the US Federal Reserve announces its latest interest rate decision.
"The vitality of the US economy, despite the growing number of cases of the Delta variant, is another argument supporting the case that the Fed should announce the timing for the beginning of the tapering after next week's meeting - a scenario that would see further dollar strengthening," ActivTrades analyst Ricardo Evangelista commented.
In London, International Consolidated Airlines Group rose 5.0%. The British Airways parent was the best-performing large cap stock. Tour operator Tui climbed 3.5%, among the best mid-cap performers, while holiday firm On the Beach jumped 8.1%.
"Companies highly reliant on international tourists saw a jump start to their share price today with a big shake up in travel rules due," Hargreaves Lansdown analyst Susannah Streeter commented.
Cabinet ministers will be reviewing the current UK travel traffic light system and whether to scrap the requirement for foreign travellers to take PCR tests, the Environment Secretary said.
George Eustice said that while no decisions have yet been taken on a potential shake-up of Covid travel rules that reportedly could make going abroad cheaper and simpler, the Covid Cabinet sub-committee is expected to meet on Friday to look at the current restrictions. The group is set to consider whether to merge the green and amber lists to form one category of low-risk countries while reducing the number of destinations on the red list.
There is also speculation that minsters will agree that fully vaccinated arrivals will no longer need to take a pre-departure lateral flow test or a post-arrival PCR test. This would save travellers around GBP100 per trip.
The Environment secretary told Sky News: "My understanding is that no decisions have actually been taken yet, although I understand there may be a meeting today to review this. We regularly review those travel restrictions."
The travel news also boosted events firm Informa, up 2.3%, InterContinental Hotels, up 1.6%, and jet engine maker Rolls Royce, up 2.2%.
The mining sector struggled, however, with Anglo American the worst FTSE 100 performer, off 4.5%. Morgan Stanley cut the stock to Equal Weight from Overweight. UBS, meanwhile, downgraded it to Sell from Neutral.
BHP and Rio Tinto were both down 2.9%.
Brent oil was quoted at USD75.30 a barrel midday Friday, up from USD75.00 at the London equities close on Thursday. Gold was quoted at USD1,763.92 an ounce, up from USD1,756.55.
By Eric Cunha; ericcunha@alliancenews.com
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