(Alliance News) - Stocks in London ended a difficult week in the red on Friday, as disappointing UK retail sales data sent the pound plunging and painted a gloomy picture about the nation's economy ahead of a major interest decision from the Bank of England next week.
"Investors have become increasingly nervous about the scale and pace of interest rate hikes after the recent bout of inflation data and next week we have some serious decisions to be made by some of the most important central banks," said Russ Mould, investment director at AJ Bell.
The US Federal Reserve unveils its interest rate decision on Wednesday, the Bank of England will announce its own decision on Thursday.
The FTSE 100 index closed down 45.39 points, or 0.6% at 7,236.68 on Friday - closing the week down 1.6%.
The FTSE 250 ended down 89.18 points, or 0.5%, at 18,797.14 - it ended the week 2.0% lower. The AIM All-Share closed down 4.10 points, or 0.5%, at 863.28, ending the week down 2.0%.
The Cboe UK 100 ended down 0.7% at 722.77, the Cboe UK 250 closed down 0.4% at 16,187.94, and the Cboe Small Companies ended down 0.7% at 12,693.84.
UK retail sales slumped in August amid cost-of-living pressures on consumers, figures from the Office for National Statistics showed.
Retail sales fell 1.6% month-on-month, far worse than the forecast 0.5% decline, according to FXStreet-cited consensus. This reversed a 0.4% rise in July.
The ONS said August's data continued "a downward trend since summer 2021 following the lifting of restrictions on hospitality; in recent months, rising prices and cost of living are also affecting sales volumes."
All main sectors - food, non-food, non-store retailing and food - fell over the month, something which has not happened since July 2021, when all Covid restrictions on hospitality were lifted.
"It's Bleak Friday for the pound, amid worries the UK has hurtled into recession, as the cost-of-living crisis intensifies and confidence in the government's ability to prompt an economic turnaround fades," said Susannah Streeter, analyst at Hargreaves Lansdown.
The pound was quoted at USD1.1431 at the London equities close Friday, down from USD1.1494 at the close on Thursday. Around midday sterling was trading at its lowest level since 1985 against the dollar.
In European equities on Friday, the CAC 40 in Paris ended down 1.3%, while the DAX 40 in Frankfurt ended down 1.7%.
The eurozone's annual inflation rate was confirmed at a fresh high of 9.1% in August.
According to Eurostat, the single currency bloc's yearly inflation rate accelerated to 9.1% in August from 8.9% in July. The figure was in line with an earlier estimate.
The yearly inflation rate has jumped for four months in-a-row. It stood at 3.0% in August 2021.
The European Central Bank targets a yearly inflation rate of 2%.
The euro stood at USD1.0025 at the European equities close Friday, up against USD0.9996 at the same time on Thursday.
Against the yen, the dollar was trading at JPY142.93 late Friday, down compared to JPY143.36 late Thursday.
Fawad Razaqzada, market analyst at CityIndex and FOREX.com said: "The [Bank of Japan] remains the only major central bank still continuing with its existing ultra-loose monetary policy. Unsurprisingly, the yen has slumped to repeated multi-year lows... Will the BoJ surprise the markets and start tightening its belt – especially with inflation becoming very hot? It will need to change its policy if the yen has any chance of a comeback soon."
In the FTSE 100, Sports Direct-owner Frasers fell 1.9% after MySale Group said the firm's GBP14 million takeover bid is too low.
At two pence per share, MySale said the bid was the lowest Frasers could have offered, under City rules.
Frasers in June acquired just shy of a 29% stake in MySale. It is currently attempting to take full ownership of the online retailer.
Shares in AIM-listed MySale soared 14% as it slammed the bid.
In the FTSE 250, Royal Mail fell 7.4% as the postal service and courier company denied accusations that the company is in talks with a private equity group regarding a takeover.
It said the accusations were made by Dave Ward, general secretary of the Communication Workers Union.
The CWU is the main trade union for the telecommunications and postal delivery industries in the UK. Members of the union began strike action against Royal Mail on Thursday, in a worsening dispute over pay and conditions.
A spokesperson for Royal Mail said: "The irony is that by taking his members out on strike and refusing to discuss the changes needed to modernise Royal Mail, Dave Ward is increasing the possibly that we will become a takeover target – the very thing the CWU is now telling its members to fear."
Elsewhere in London, Capita jumped 13% on a contract extension with Barnet Council and the disposal of its subsidiary Pay360 to Access PaySuite.
The London-based outsourcing services secured a contract extension with the north London council that is worth GBP42.7 million. With indexation and potential additional work, however, the contract could be worth up to GBP57 million, it added.
For its disposal of payments business Pay360, Capita expects to receive gross proceeds of GBP156 million.
Stocks in New York were in the red at the London equities close, with the Dow Jones Industrial Average down 1.0%, the S&P 500 index down 1.3%, and the Nasdaq Composite down 1.6%.
Brent oil was quoted at USD92.24 a barrel at the London equities close Friday, up from USD90.04 late Thursday.
Gold was quoted at USD1,677.01 an ounce at the London equities close Friday, up against USD1,667.03 at the close on Thursday.
On Monday, financial markets in London will be closed for the state funeral of Queen Elizabeth II.
Markets in Japan will be closed for Respect for the Aged Day.
By Heather Rydings; heatherrydings@alliancenews.com
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