LONDON MARKET CLOSE: Muted end to US inflation-dominated week

(Alliance News) - London's FTSE 100 was hit by a heavy share price decline for AstraZeneca on Friday, rounding off a week which has been overshadowed by Wednesday's hot US consumer price index print, which sent the dollar flying.

The pound managed to claw back some of its losses on Friday, though the euro remains at lows last seen in July 2020.

On the London Stock Exchange, Burberry closed the best large-cap performer, regaining ground after being hit on Thursday. AstraZeneca tumbled in the wake of its third quarter report.

The large-cap FTSE 100 index ended down 36.27 points, or 0.5%, at 7,347.91. The mid-cap FTSE 250 index closed down 16.53 points, 0.1%, at 23,557.52. The AIM All-Share index ended up 5.35 point, 0.4%, at 1,252.71.

For the week, the FTSE 100 rose 0.6%. However, the FTSE 250 lost 0.2%, while the AIM All-Share advanced 1.3%.

The Cboe UK 100 index ended down 0.5% at 728.16. The Cboe 250 closed 0.2% lower at 21,025.43 and the Cboe Small Companies index ended down 0.2% at 15,563.02.

After a strong advance on Thursday, hitting a new post-virus high, the FTSE was tantalisingly close to the 7,403.92 mark, where it stood before Covid-19 worries battered stocks.

"Judging by Thursday's rally, it looked as if we would hit the magic 7,403.92 level on Friday, but so far that has not happened. In fact, an initial boost on the last trading day of the week quickly turned into disappointment," AJ Bell analyst Russ Mould commented.

For London's blue-chip benchmark, Friday was a "downbeat" end to a "mixed week", IG analyst Chris Beauchamp commented. The FTSE has still notched a weekly gain, however.

Beauchamp added: "The inflation issue has many moving parts, and only some of these elements will actually be addressed by rate increases, a point that has surely not escaped the Fed and other central banks. Stocks nonetheless seem relatively calm about the situation, showing little desire to give back much of the recent rally, and looking forward to further gains in the final weeks of the year."

In mainland Europe, meanwhile, the CAC 40 stock index in Paris closed up 0.5%, while the DAX 40 in Frankfurt inched up 0.1%.

The dollar's gains ebbed somewhat, with the pound and yen able to stem losses, though the greenback still ended the week in robust shape.

Sterling recovered to USD1.3413 at the London equities close on Friday, from USD1.3381 on Thursday.

The euro, still below the USD1.15 mark, fell to USD1.1450, from USD1.1462. Against the yen, the dollar was trading at JPY113.88, down from JPY114.02.

Gold reached its best level since the summer, earlier this week. Bullion's advance on Friday was slightly more cautious, however.

Gold inched up to USD1,861.52 an ounce late Friday, from USD1,861.20 on Thursday.

"Gold is seen as a good hedge against inflation, so the rise in consumer prices would normally be likely to offer support to the precious metal. However, the differential in market expectations, regarding the timings for hiking rates, between the Fed and other major central banks, creates scope for further greenback gains, as the Federal Reserve looks set to start hiking in 2002, while elsewhere the picture isn't as clear. This scenario is likely to keep supporting the US dollar and therefore limit the upside for gold," ActivTrades analyst Ricardo Evangelista commented.

In London, Burberry rose 4.0%, the best large-cap performer, clawing back some losses from Thursday.

In addition, peer Richemont on Friday posted a sharp rise in profit. Interim pretax profit surged to EUR1.58 billion from EUR344 million a year earlier, in a good read across for other luxury goods firms.

Richemont's stock jumped 11% in Zurich. In Paris, LVMH Moet Hennessy added 2.4%.

AstraZeneca ended the worst blue-chip performer in London, down 6.9%. The drug maker reported total revenue in the year to date - including newly-acquired Alexion Pharmaceuticals - was USD25.41 billion, up 32% year-on-year. On a constant currency basis, revenue grew by 28% in the nine months to September 30. Total revenue in the third quarter alone increased by 50% to USD9.87 billion.

Astra noted that the Alexion integration is progressing well, creating new opportunities in rare diseases. Astra bought Alexion, a Boston, Massachusetts-based biotech firm, in July for USD13.3 billion in cash and 236.3 million new AstraZeneca shares. Revenue includes Alexion from July 21 onward.

CMC Markets analyst Michael Hewson commented: "Having seen steady gains leading up to today's third quarter numbers, hopes were high that AstraZeneca would be able to deliver a decent set of numbers as it drives through its Alexion integration. Sadly, today's numbers haven't delivered, with the shares falling back sharply."

The travel sector also struggled, on renewed virus worries.

British Airways parent International Consolidated Airlines Group fell 2.9%. Cruise ship firm Carnival shed 3.9%.

"Recorded SARS-CoV-2 infections have surged to new records in some European countries including Germany, Austria the Netherlands and Slovenia. First signs of medical stress are appearing in the worst-affected regions. Does this put our assumption at risk that the pandemic will only be a minor drag on economic performance in coming months? From a public health perspective, the situation is challenging and will most likely get worse in coming weeks," analysts at Berenberg commented.

Elsewhere in London, Avon Protection dropped a massive 51% on strife at its body armour unit. Avon said its Vital Torso Protection Enhanced Small Arms Protective Inserts plates have encountered a failure in first article testing which will significantly delay the likely approval timetable for this product.

The protection equipment company said it also has suffered further delays in obtaining final product approvals for the US Defense Logistics Agency Enhanced Small Arms Protective Inserts body armour plates, with approvals for this product now expected in the second quarter of its current financial year ending September 2022.

In light of these issues, Avon Protection said it has initiated a strategic review of its body armour business.

Brent oil was quoted at USD82.26 late Friday, slipping from USD82.48 late Thursday.

Equities in New York were higher at the time of the London market close. The Dow Jones Industrial Average was up 0.4%, the S&P 500 advanced 0.6%, while the Nasdaq Composite added 0.8%.

Johnson & Johnson rose 1.3%. It became the latest firm to announce plans to break up.

J&J will split into two listed companies, separating its consumer health arm that sells Band-Aids and Tylenol from its pharmaceutical division.

Johnson & Johnson said in a statement it will create "two global leaders that are better positioned to deliver improved health outcomes for patients and consumers through innovation." The Consumer Health arm will become a publicly traded company.

Earlier this week, conglomerate General Electric also announced plans to split.

Monday's local corporate calendar has a trading statement from housebuilder MJ Gleeson, an interim report from software company Kainos and annual results from esports company Gfinity.

The economic calendar has a gross domestic product report from Japan overnight, as well as the latest UK Rightmove monthly house price index.

The week picks up pace with eurozone GDP data and a UK unemployment report on Tuesday. Inflation will be back in focus on Wednesday, with consumer price index reports from the UK, eurozone and Canada.

By Eric Cunha; ericcunha@alliancenews.com

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