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LONDON (Alliance News) - UK stock indices have struggled to get off the ground Friday, while major European markets have performed better after surprisingly strong Eurozone GDP data. Meanwhile US macro data has disappointed, adding to dollar weakness and allowing the pound to rally to a multi-year high.
The FTSE 100 has closed fractionally higher at 6,661.98, the FTSE 250 has closed up 0.5% at 16,110.62, and the AIM All-Share has closed up 0.3% at 875.46.
Major European markets have performed better, with the French CAC 40 closing up 0.6% and the German DAX closing up 0.7%.
After the close of European equity markets, US equities are mixed, with the DJIA up 0.4%, the S&P 500 up 0.2%, and the Nasdaq Composite down 0.2%.
European markets received a boost after data showed the Eurozone economy grew faster than expected in the fourth-quarter of 2013, with GDP growing by 0.5% year-on-year, compared to the 0.4% that had been expected. On a quarter-on-quarter basis, GDP growth in the region was 0.3%, faster than the 0.2% expected.
"This confirms that the gradual recovery in the Eurozone remains on track," said UBS economist Gyorgy Kovacs. "In our view, one of the most important developments in fourth-quarter of 2013 was that all of the four major Eurozone economies recorded positive growth," the economist said.
Within those four major economies, Germany recorded quarterly growth of 0.4%, higher than the 0.3% expected and France recorded 0.3%, higher than the 0.2% expected, while Spain recorded 0.3% growth. Even Italy, which Friday saw its Prime Minister, Enrico Letta, hand in his resignation on the back of criticism over his lack of action to improve the economy, posted 0.1% GDP growth.
The strong GDP data comes after downward revisions Thursday by the European Central Bank of its inflation expectations. With the ECB reportedly considering further easing in its monetary policy, the markets will now be looking to how ECB President Mario Draghi will try to deal with very modest economic growth but continuing downward pressure on prices in the eurozone.
US economic data has been less impressive Friday, with industrial production falling 0.3% in January, from the 0.3% growth seen in December. The pullback came as a surprise to economists, who had expected production to increase by another 0.3%.
The disappointing data follows unexpectedly weak retail sales data and higher-than-expected jobless claims on Thursday, as well weaker than expected non-farm payrolls last week - continuing a trend that has seen everyone from analysts to the Federal Reserve blame the extreme weather for the misses to forecasts.
"It appears that the recent bad weather in the US is feeding through into more than just the labour markets after the latest industrial and manufacturing production data showed sharp falls in January," said CMC Markets Chief Analyst Michael Hewson.
The weak US data has dragged on the dollar, sending it lower across the board and allowing the pound up to a multi-year high Friday of USD1.6743, testing the peak of early 2011. If the pound pushes just another few points from there it will be at its strongest level against the dollar since November 2009.
The better-than-expected Eurozone GDP data has kept the single currency well supported against the softened dollar. The euro currently trades at USD1.3685.
The weak dollar has also allowed the gold to make further gains. The precious metal continues to make new three-month highs, having broken above USD1,300 to make a high of USD1,321.20 per ounce.
"The big story in the market right now is gold. The yellow metal closed out last year with one of its worst performances to date, being hit by bearish calls from banks and huge withdrawals. This year, however, is looking to be different. And the fact that gold has rallied more than USD100 from those lows is a positive sign, drawing in more capital from other asset classes," said Spreadex trader David White.
The extreme global weather has not only sent the dollar lower this week but the flooding in the UK has also had an impact on UK stocks. As the water levels and floods in the UK rise, so too do the insurance claims. The Non-Life Insurance sector of the FTSE 350 has fallen 1.3% over the week, compared with a 1.5% gain for the FTSE 350 as a whole. RSA has been amongst the worst hit, falling 1.5% Friday alone.
"This is likely related to fears about exposure to, and related costs of the floods," said CMC's Hewson. "Insurance claims in respect of submerged vehicles are likely to be factored in as well."
The FTSE 100 as a whole still made a solid gain over the week, rising 92 points, or 1.4% since Monday, boosted by the new US Federal Reserve Chair Janet Yellen Tuesday who managed to convince markets that the US central bank is in safe hands promising, "a great deal of continuity in the FOMC's approach to monetary policy," between her Chairmanship and that of her predecessor Ben Bernanke.
On Friday alone, the metal and mining stocks received a further boost from the recovering precious metal prices. Fresnillo closed as the top gainer in the FTSE 100, up 5.3%. The FTSE 350 industrial metals sector gained 1.6% Friday, while the mining sector gained 1.0%.
Petrofac was also a top blue chip gainer Friday. The oil equipment and services group was upgraded by analysts at Berenberg to Buy. The bank says Petrofac is set to get a boost from new contracts in Turkmenistan, Kasakhstan, and Algeria this year.
Vodafone Group has spent some of the money it got from its Verizon Wireless deal in India, buying up mobile spectrum licenses for GBP1.9 billion. The new spectrum will enable it to roll out 4G services and bolster its 3G services in key cities like Mumbai and Delhi. There has already been suggestion that Vodafone paid too much in the deal and its shares closed down 1.4% Friday.
Next week begins quietly, with very little of note in the data calendar Monday. The macro releases will quickly build up however, with UK inflation data for January due on Tuesday and UK unemployment on Wednesday, with the minutes of the latest Bank of England policy meeting released at the same time.
Full-year results from software group Fidessa and real estate group Hammerson are due before the market open on Monday, along with interim results from BHP Billiton.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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