(Alliance News) - A US drone strike that killed an Iranian military leader put a quick end on Friday to what had been an upbeat start to the new year for global equities, though oil companies and gold miners benefited from a rise in those two commodities.
London's large-cap FTSE 100 index was quoted down 37.02 points, or 0.5%, at 7,567.28 at midday Friday. The mid-cap FTSE 250 index was down 204.57 points, or 0.9%, at 21,903.72. The AIM All-Share index was down 0.2% at 961.08.
The Cboe UK 100 index was down 0.5% at 12,818.87. The Cboe 250 was 0.7% lower at 19,852.08 and the Cboe Small Companies down 0.2% at 12,258.60.
The dollar was mostly higher. Sterling was quoted at USD1.3074 Friday midday, down from USD1.3155 at the London equities close on Thursday. The euro was quoted at USD1.1130, down from USD1.1190 late Thursday.
Against the yen, however, the dollar was quoted at JPY108.04, down versus JPY108.79 late Thursday.
In mainland Europe, the CAC 40 in Paris was down 0.6% and the DAX 30 in Frankfurt was 1.7% lower in early afternoon trade.
Financial markets in Japan remain closed for the New Year's holiday. In China, the Shanghai Composite index ended marginally lower, while the Hang Seng index in Hong Kong closed down 0.3%.
"The positively upbeat mood which marked the start of the New Year hasn't lasted long as geopolitical tensions have abruptly returned to the forefront of investors' minds after a US air strike has killed a top Iranian military leader in Baghdad. In response, there's been a clear market reaction with crude oil rallying over 3% higher, European stocks and US futures falling back and safe havens such as government bonds and precious metals catching a bid," XTB analyst David Cheetham commented.
Iran Supreme Leader Ayatollah Ali Khamenei has threatened the US with "harsh retaliation" after the killing of influential Iranian General Qassem Soleimani, Iranian state television reported on Friday.
Soleimani's death would not affect what he termed Islam's final victory over "the imperialists", Khamenei said in remarks carried on state television. Khamenei also declared three days of national mourning.
The US Defense Department in Washington confirmed that Soleimani was killed in a drone attack near Baghdad airport in the early hours of Friday, in what the US described as a "defensive action".
Soleimani was killed along with with the deputy head of Iraq's powerful Shiite Hashd Shaabi militia, Abu Mahdi al-Mohandes, the group said.
Part of the 750 forces from the US 82nd Airborne division dispatched to the region a few days ago have already arrived in Baghdad, a US defense official told AFP.
Wall Street is set to open firmly in the red. The Nasdaq Composite index is called 1.7% lower, the S&P 500 down 1.5% and the Dow Jones Industrial Average 1.4% lower.
In commodities, gold was quoted at USD1,549.14 per ounce Friday midday, surging from USD1,527.98 at the London equities close on Thursday. Brent oil was trading at USD68.88, up from USD65.76.
"Turbulence often sees investors reaching for the safety belt of gold exposure and this explains the advance for the precious metal this morning. The FTSE 100 fared better than some of its global peers, reflecting a heavy weighting towards oil stocks BP and Royal Dutch Shell, which benefited from the surge in the price of crude, and continued weakness in the pound which boosts the relative value of constituents' overseas earnings," AJ Bell investment director Russ Mould said.
BP and Royal Dutch Shell were two of very few gainers in the large-cap index at midday. BP was 1.5% higher, Royal Dutch Shell's A shares were up 1.3%, with B shares up 1.2%.
Oil stocks in the FTSE 250 index were also boosted. Premier Oil was 2.7% higher. Tullow Oil clawed back some of Thursday's losses. It was quoted 0.8% higher midday Friday.
Mid-cap gold miner Centamin was quoted 2.4% higher on midday, while peer Fresnillo was up 2.5%.
Elsewhere among the large caps, British American Tobacco was among the index leaders, up 2.0%.
The US Food & Drug Administration said cartridge-based e-cigarettes in flavours other than tobacco or menthol will become illegal unless specifically authorised by the government. In September the White House had promised a full ban, but this was scuppered by industry pressure.
BAT said the FDA move shows vaping remains a credible alternative to smoking, and welcomed the clarity the new ruling gives.
The change will take effect in early February, outlawing cartridges with fruit, mint and candy flavours, which are particularly popular with young people. The ban will exempt large, tank-based rechargeable vaping devices, however, which are primarily sold in vape shops that cater to adults.
Drum tobacco and Rizla cigarette paper producer Imperial Brands, which also owns the blu vaping brand, was 1.2% higher.
Next was 1.1% lower, being pulled back from earlier gains. In its Christmas trading update, the FTSE 100 home and fashion retailer upped its annual profit guidance and predicted further improvements in financial 2021.
Total full price sales - which include interest income - grew by 5.2% on a year before in the period from October 27 to December 28. Next said the result was 1.1% ahead of its internal forecasts.
For the year to the end of January, Next upped its pretax profit guidance by GBP2 million to GBP727 million, which would represent 0.6% growth from last year.
"This morning's results marks the start of the highly anticipated Christmas trading updates from retailers, and investors are hoping Next's results pave the way to a positive start for the much maligned retail sector. These results emphasise the importance of Next's online offering, something the industry as a whole has had to adapt to in recent years. However, retailers are still likely to face a difficult 2020 as the sector remains blurred by the current macroeconomic factors and impacts of the unseasonal weather we are all accustomed to," The Share Centre analyst Joe Healey said.
It was a mixed session for other large-cap retailers, Burberry was 0.3% higher, though JD Sports was quoted 2.8% lower, third from bottom in the blue-chip index.
Former FTSE 100-constituent Marks & Spencer was 1.4% lower. The company, which was relegated to the FTSE 250 in September, announced the appointment of David Surdeau as its interim chief financial officer. He replaces Humphrey Singer who departed at the end of 2019.
M&S said Surdeau will begin his new role on Tuesday next week. Surdeau spent 16 years in various roles at FTSE 100 grocer Tesco, including a stint as chief financial officer of the Home Plus Korean discount chain unit.
In UK economic news, data showed the UK's construction output reduced sharply in December, amid political uncertainty and subdued client demand ahead of the general election held last month.
The latest IHS Markit-Chartered Institute of Procurement & Supply purchasing managers' index came in at 44.4, not only down from 45.3 in November but again below the 50.0 mark which separates growth from decline.
This period of falling business activity across the construction sector is the longest recorded by IHS Markit for almost a decade, it said.
"Brexit uncertainty and spending delays ahead of the general election were once again the most commonly cited factors highlighted by firms experiencing a drop in construction activity," said IHS Markit Economics Associate Director Tim Moore.
Still in the economic calendar on Friday is German consumer price inflation at 1300 GMT.
By Eric Cunha; ericcunha@alliancenews.com
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