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(Alliance News) - Blue-chip European markets ended higher on Friday but faced afternoon selling pressure as slightly hawkish words from Federal Reserve Chair Jerome Powell at Jackson Hole hurt investor sentiment.
London's FTSE 100 recovered some poise after falling into the red after Powell's words, ending the day on the up, to post a fourth-successive rise.
The FTSE 100 index edged up 4.95 points, or 0.1%, at 7,338.58. The FTSE 250 shed 63.55 points, 0.4%, to 18,131.02, and the AIM All-Share slipped 0.85 of a point, 0.1%, to 733.67.
For the week, the FTSE 100 added 1.1%, both the FTSE 250 and AIM All-Share rose 0.2%.
The Cboe UK 100 rose 0.1% to 731.79, the Cboe UK 250 lost 0.5% to 15,853.67, and the Cboe Small Companies gave back 0.7% to 13,416.85.
In European equities on Friday, the CAC 40 in Paris rose 0.2%, while the DAX 40 in Frankfurt edged up 0.1%.
Stocks in New York were largely higher, below morning highs, but off session lows. The Dow Jones Industrial Average rose 0.3%, the S&P 500 index up 0.2%, and the Nasdaq Composite was flat.
The pound was quoted at USD1.2571 late Friday afternoon in London, down from USD1.2639 at the equities close on Thursday. The euro stood at USD1.0783, lower against USD1.0835. Against the yen, the dollar was trading at JPY146.27, higher compared to JPY145.66.
Federal Reserve Chair Jerome Powell on Friday said the US central bank was "prepared" to raise interest rates further in order to get inflation "sustainably" down to its 2% target.
"Although inflation has moved down from its peak, it remains too high. We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident inflation is moving sustainably down to our objective," Powell said at the Jackson Hole symposium in Wyoming.
The central banker added that while the lower monthly readings of personal consumption expenditures inflation in June and July were "welcome", the two months of "good data" were "only the beginning of what it will take to build confidence that inflation is moving down sustainably" to the Fed's 2% goal.
Late last month, the central bank's Federal Open Market Committee raised its funds rate by a quarter percentage point to a target range of 5.25% to 5.50%. It has hiked rates by 500 basis points since March of last year in a bid to cool inflation.
Capital Economics analyst Andrew Hunter said there were little signs that Powell was trying to "shift market rate expectations in one direction or another".
"Although he isn't yet ready to declare victory on inflation, noting that recent softer CPI reports were 'only the beginning of what it will take', he also didn't appear to suggest that the ongoing resilience of economic growth will necessarily prompt further tightening. Although he flagged up the risks posed by persistently above-trend growth and the possibility that labour market conditions stopped easing, in both cases, he noted only that these developments 'could' prompt further tightening," Hunter commented.
"Although there are some reasons to think that neutral rate could be a bit higher than before the pandemic, that shouldn't prevent rates being cut significantly over the next couple of years towards that neutral level if, as we expect, inflation continues to fall back. Indeed, although we're no longer very confident in the idea that the economy will fall into recession over the coming quarters, we think that most of the conditions are already in place for core inflation to return to the Fed's 2% target regardless.
"As a result, we still think inflation and interest rates will surprise markets on the downside and forecast that, from a current peak of 5.25%-5.50%, the fed funds target range will be cut to 3.25%-3.50% by the end of 2024."
It was a somewhat mixed bag for London's FTSE 100 on Friday. Gold miners Endeavour Mining and Fresnillo lost 2.8% and 2.1% as the dollar strengthened. Gold has an inverse relationship with the greenback.
Gold was quoted at USD1,906.88 an ounce late Friday, lower against USD1,921.41 on Thursday.
Oil majors BP and Shell, among the largest London listings, rose 0.4% and 0.5%, tracking Brent prices higher.
Brent oil was quoted at USD83.57 a barrel, up from USD82.41 late Thursday.
Elsewhere, Watches of Switzerland Group plunged 21%, with the market unconvinced that it will be unscathed after Rolex acquired Swiss watch retailer Bucherer.
WOSG is a seller of Rolex watches, and investors are fretting over the possibility that its relationship with the luxury watchmaker will change due to the Bucherer buy.
WOSG said the deal does not represent a strategic move into retail by Rolex, however, and there will be no change in the product allocation or distribution of Rolex watches. It said it had this "confirmed by the highest level of Rolex management" in Geneva.
Also tumbling, CMC Markets lost 9.7%. It warned of a drop in annual income as "subdued market conditions" in the month of August weighed on trading.
The online trading platform now expects net operating income of between GBP250 million and GBP280 million for financial 2024, falling short of GBP288.4 million in financial 2023.
This was attributed to "markedly lower monetisation of client trading activity due to a higher proportion of lower margin institutional volume".
Cybersecurity services provider Shearwater surged 13%. It said trading in the first quarter of the current fiscal year saw "improving traction", as expected, with revenue exceeding that of the first quarter of financial 2023. It attributed this to more favourable market conditions.
Shearwater added that it has now received several previously delayed contracts, and that its "significant investment" in its Software division is bringing forth "a number of promising opportunities".
Shearwater added that "with market conditions in the sector being more favourable, the board is confident in seeing a much improved financial performance in the current year."
Financial markets in London are closed on Monday and re-open on Tuesday. It is an otherwise quiet day on the economic calendar on Monday, save for an Irish retail sales reading at 1100 BST.
It will be a data-heavy week in the US, with a gross domestic product reading on Wednesday, the Fed's preferred inflationary gauge on Thursday and the latest jobs report on Friday.
The local corporate calendar on Tuesday has half-year results from distribution services company Bunzl and cryptocurrency miner Argo Blockchain.
By Eric Cunha, Alliance News news editor
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