LONDON MARKET CLOSE: Cautious end to week as Evergrande worries linger

(Alliance News) - Equities in London finished the week on a softer note, with worries over the outlook for Chinese property giant Evergrande continuing to rumble on in the background.

The FTSE 100 index closed down 26.87 points, or 0.4%, at 7,051.48 on Friday, notching a gain of 1.3% for the week as a whole

The FTSE 250 ended down 0.9%, or 221.39 points, at 23,608.79 - down 0.2% for the week-to-date - and the AIM All-Share closed down 5.42 points, or 0.4%, at 1,266.98, and has fallen 0.7% since the start of the week.

The Cboe UK 100 ended down 0.4% at 701.11, the Cboe UK 250 closed down 0.9% at 21,408.18, and the Cboe Small Companies ended up 0.8% at 15,715.66.

In European equities on Friday, the CAC 40 in Paris ended down 1.0% and the DAX 40 in Frankfurt ended 0.7% lower.

"After the strong gains of Tuesday-Thursday European stocks have continued to take a breather, providing one note of caution for the week ahead," said Chris Beauchamp, chief market analyst at IG, "but it seems like stock markets have successfully navigated the worries over Evergrande and jitters about the Fed's policy outlook."

Uncertainty continues to swirl over the future of Chinese property giant Evergrande, with some Chinese banks disclosing what they are owed, saying they can cope with a potential default.

The announcements came as Evergrande Group promised to talk with some individual investors who bought its debt while creditors waited to see whether Beijing will intervene to oversee a restructuring to prevent financial disruptions.

Evergrande's struggle to meet government-imposed debt limits has prompted fears a default might disrupt the Chinese economy or global financial markets.

"Concerns about contagion effects from Evergrande haven't gone away, but they appear to have taken a back seat to worries about supply chain blockages, surging energy prices and rising inflationary pressure, hence the rise in bond yields this week," said CMC Market chief market analyst Michael Hewson.

Worries over rising prices for fuel and food were reflected in the GfK's UK Consumer Confidence Barometer for September, which fell by five points to minus 13, a drop not seen since October last year. Expectations for the general economic situation over the coming 12 months fell 10 points to minus 16, but is still 22 points higher than September last year.

GfK Client Strategy Director Joe Staton said: "On the back of concerns about rising prices for fuel and food, the growth in headline inflation, tax hikes, empty shelves and the end of the furlough scheme, September sees consumers slamming on the brakes as those already in economic hardship anticipate a potential cost of living crisis."

Economic sentiment also took a hit in Germany. The Munich-based ifo's business climate index fell to 98.8 points, after recording a revised 99.6 in August, as companies were less satisfied with their current business.

"Not since March 2020 have assessments fallen so far. Last spring's great optimism in expectations has almost completely evaporated," ifo said in its statement Friday.

The data comes ahead of a key weekend in Germany, as the eurozone's largest economy heads to the polls to decide who will succeed Angela Merkel.

The CDU has led four successive coalition governments with Merkel at the helm since 2005. Merkel is not running for a fifth term, which has given Germany's remaining parties a realistic chance of shaking up the country's political landscape.

The race is tight, with Olaf Scholz from the Social Democrats the favourite to become the next chancellor, but uncertainty surrounding the make-up of the coalition government. Most observers expect negotiations to begin on some kind of three-way coalition - something not seen for decades in Germany.

The euro stood at USD1.1710 at the European equities close Friday as markets eye the German election, down against USD1.1735 at the same time on Thursday.

The pound was quoted at USD1.3670 at the London equities close Friday, sliding from USD1.3736 at the close on Thursday. Against the yen, the dollar was trading at JPY110.73, rising from JPY110.18 late Thursday.

Brent oil firmed at USD77.86 a barrel at the London equities close Friday from USD77.04 late Thursday. Gold was quoted at USD1,751.33 an ounce at the London equities close Friday against USD1,748.28 at the close on Thursday.

Stocks in New York were in the red at the London equities close, with the DJIA down 0.2%, the S&P 500 index down 0.2%, and the Nasdaq Composite down 0.6%.

In London, travel firms managed to come out on top as they look ahead to relaxed European-US travel rules.

White House Covid-19 co-ordinator Jeff Zients announced on Monday that foreign visitors will be permitted to enter from November if they demonstrate proof of vaccination and a negative test taken in the past three days.

This led to a buoyant week for stocks exposed to the travel sector, such as jet engine maker Rolls-Royce, which closed up 4.4% on Friday to cap a seven-session winning streak. British Airways parent International Consolidated Airlines also advanced further on Friday, closing up 2.0% in a week which saw it jump 11% in one day alone on US travel hopes.

At the top of the FTSE 250 was Cineworld, up 4.8%, with the cinema operator looking ahead to the release of the eagerly anticipated latest James Bond film instalment. "No Time To Die" – billed as Daniel Craig's final 007 outing - is out next week.

Petrofac shares jumped 27% after the UK Serious Fraud Office said it has pleaded guilty to 7 bribery offences.

After being heard at Westminster Magistrates' Court, the case has been sent to the Crown Court, which the regulator explained is in line with the legal procedure for SFO cases into serious and complex financial crime.

The SFO added: "The next hearing will take place on Monday 27 September at Southwark Crown Court, where pleas from the defendant will be entered. Petrofac Ltd has reported its intention to plead guilty, following a plea agreement it has entered into with the Serious Fraud Office."

On AIM, shares in CVS Group tumbled 7.9% after the UK Competition & Markets Authority revealed it has opened an investigation into the veterinary services provider's GBP20.4 million acquisition of Quality Pet Care.

Quality Pet Care, which trades as The Vet and has eight practices across the UK, was bought by CVS on August 19. The regulator is investigating whether the transaction may substantially reduce competition and opened an invitation to comment, which closes on October 8.

The UK corporate calendar for Monday has a trading statement from United Utilities and half-year results from i3 Energy, Microsaic Systems and FireAngel Safety Technology.

A quiet economic calendar on Monday has US durable goods orders at 1330 BST.

By Lucy Heming; lucyheming@alliancenews.com

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