(Correcting that Alex Stubb is Finland's finance minister.)
LONDON (Alliance News) - London share prices ended mixed Friday, with oil-related stocks dragged down by the falling price of crude, while the eurogroup meets in Brussels to try to reach a deal on Greece's third debt bailout.
Earlier Friday, China eased market concerns by raising the value of the yuan after three consecutive days of devaluation.
The FTSE 100 finished down 0.3% at 6,550.74, ending the week down 2.5%. The FTSE 250 closed up 0.1% at 17,620.93 and the AIM All-Share ended down 0.1% at 749.87.
European indices also ended lower, with the CAC 40 in Paris down 0.5% and the DAX 30 in Frankfurt down 0.2%.
When the European equity markets closed, the Eurogroup of finance ministers was still holding an extraordinary meeting in Brussels to discuss Greek reforms.
Eurozone finance ministers were optimistic that they would be able to approve Greece's third rescue package in five years, but stressed that the International Monetary Fund must also be on board.
Finland Finance Minister Alex Stubb told reporters as he arrived at the meeting that he would be "very surprised" if a deal is not reached to approve the EUR86 billion bailout for the cash-strapped country. Stubb said that Finland is aligned with Germany on the need to involve the IMF.
"The IMF will be involved only with debt relief, and we want the IMF to be involved but we don’t want debt relief. So some kind of solution will have to be found," said the Finnish finance minister.
Berenberg Chief Economist Holger Schmieding noted that approval does not mean a done deal, as German finance minister Wolfang Schaueble has raised some questions about the package, including how the IMF is eventually involved in the Greek bailout.
Schaueble's Slovak counterpart Peter Kazimir described the IMF as a "watchdog" whose technical support is crucial to ensuring credible reforms.
"Also, the prospect of early elections in Greece in late September, that is after a significant amount of money will have been disbursed but before Greece has passed all the reforms foreseen under the deal, does complicate the calculus for Europe a lot," wrote Schmieding. "Still, as even the relevant Finnish parliamentary committee already endorsed the deal, we consider it more likely than not that finance ministers will agree to the deal tonight."
The Greek parliament approved the terms of the deal with eurozone creditors with support from the opposition, after Prime Minister Alexis Tsipras saw more deserters from his coalition. The vote followed an all-night debate, with 222 of 297 lawmakers present voting Yes, while 64 voted No. Eleven parliamentarians abstained.
Tsipras received support for the bailout from 118 of the 162 members of his coalition in Parliament, his aides said. That support falls below the 120 members needed in the 300-member chamber for a minority government to continue to govern. Tsipras will continue to lead the government until the first tranche of the new bailout is paid out and will then appear before Parliament to call a confidence vote, the aides said.
Eurozone economic growth slowed marginally in the second quarter, preliminary data from Eurostat showed. Gross domestic product expanded 0.3% sequentially in the June quarter, falling short of the rate expected by economists of 0.4%, matching the first quarter reading. Year-on-year, GDP growth improved to 1.2% from 1.0%. Nonetheless, annual growth was slightly slower than the 1.3% expansion forecast by economists.
Final data from Eurostat confirmed 0.2% inflation for July, the same rate as seen in June. On a monthly basis, consumer prices fell 0.6%. At the same time, core inflation accelerated to a 15-month high of 1.0% from 0.8% in June. The figures matched the flash estimate released on July 31.
When the European stock markets closed, Wall Street was flat to lower, with the DJIA up 0.1%, the S&P 500 flat and the Nasdaq Composite down 0.3%.
The US Federal Reserve released a report on Friday showing that US industrial production increased by more than expected in July. The report said industrial production climbed by 0.6% that month after inching up by 0.1% in June. Economists had expected production to increase by about 0.4%.
The bigger than expected increase in production came as manufacturing output increased by 0.8% in July after dipping by 0.3% in the previous month. The Fed said the rebound in manufacturing output was primarily because of an increase in production of motor vehicle assemblies.
The data come ahead of the Federal Open Market Committee minutes from the last Fed meeting, expected to be released Wednesday at 1900 BST. Many analysts had expected the US central bank to raise US interest rates in September, but some later said that the moves by the People's Bank of China have turned the possibility into a closer call.
The Chinese central bank slightly raised Friday its daily reference rate to CNY6.3975 to the dollar, compared to CNY6.4010 on Thursday. The move followed three consecutive days of devaluation by the People's Bank of China, sparking some concerns of a currency war.
Outside China, oil prices remained under pressure, weighting on oil-related stocks in London. West Texas Intermediate oil fell to a new six-and-a-half year-low on Thursday at USD41.65 a barrel, while Brent oil hit a low of USD48.82 a barrel. At the London equity markets close, WTI is at USD42.39 and Brent is at USD49.24.
Weir Group ended down 1.6%, BP down 1.0% and Royal Dutch Shell 'A' shares down 1.4%. In the FTSE 250, John Wood Group closed down 2.9%, while Hunting and Petrofac both closed down 2.4%.
The FTSE 350 Oil Equipment Services & Distribution index was the worst performing sector index, down 2.2%, while the FTSE 350 Oil & Gas Producers index ended down 1.1%.
Liberum reiterated its Sell rating on Weir and cut its price target, saying it believes that consensus estimates are too high for the engineering services company amid concerns about the minerals and oil and gas markets. Liberum cuts its price target to 1,330.00 pence from 1,450.00p. The stock closed at 1,462.00p.
Elsewhere, the Financial Times reported that BP faces the prospect of fresh regulatory fines after a US judge ruled that its energy traders rigged the natural gas market in Texas in the aftermath of a 2008 hurricane.
Citing the judge at the Federal Energy Regulatory Commission in the US, the FT said BP traders based at the company's Southeast Gulf Texas office plotted to lose some money on physical gas positions in order to boost the value of holdings of financial derivatives tracking gas.
Elsewhere on the London Stock Exchange, Coca-Cola HBC was down 1.3%, giving back some of the gains made Thursday after the company reported a rise in pretax profit in the first half of its financial year. Nomura reiterated its Reduce rating on the company, saying the soft drinks bottler reported strong first half results but challenges still remain.
In a very light economic calendar Monday, eurozone trade balance data due at 1000 BST. In the US, the NAHB housing market index is due at 1500 BST.
In the UK corporate calendar, half-year results from housebuilder Bovis Homes Group and shipping services company Clarkson are expected before the UK market open.
By Daniel Ruiz; danielruiz@alliancenews.com
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