Stocks in Europe ended lower on Friday, rounding off a tricky week, with poor earnings weighing on the banking and pharmaceutical sectors.
Eyes are also on the US monetary policy outlook. A US inflation reading failed to alter Federal Reserve interest rate expectations. It is still expected to leave rates unmoved next week.
The FTSE 100 index closed down 63.29 points, 0.9%, at 7,291.28. The FTSE 250 ended up 83.14 points, 0.5%, at 16,866.23, and the AIM All-Share closed up 4.62 points, 0.7%, at 674.46.
The Cboe UK 100 ended down 0.9% at 727.37, the Cboe UK 250 closed up 0.7% at 14,618.48, and the Cboe Small Companies ended up 0.1% at 12,564.46.
US inflation pressure eased last month, according to the Federal Reserve’s preferred tracker, strengthening the case for the central bank to hold interest rates steady despite strong economic growth.
According to the Bureau of Economic Analysis, the core personal consumption expenditures price index rose 3.7% on-year in September, fading from the 3.8% increase registered in August.
August’s reading was downwardly revised from 3.9%. It was the tamest reading since May 2021 and was in line with FXStreet cited consensus.
The core reading, the Fed’s preferred inflation gauge, does not include food or energy.
The headline PCE index rose 3.4% on-year in September, in line with August’s move. August’s reading was downwardly revised from 3.5%. The headline PCE index has now sat at 3.4% for three months in succession.
The pound was quoted at $1.2149 at the London equities close on Friday in London, higher compared to $1.2105 on Thursday. The euro stood at $1.0594, up against $1.0527. Against the yen, the dollar was trading at JP¥149.59, lower compared to JP¥150.48.
Stocks in New York were mixed at the London equities close, with the Dow Jones Industrial Average down 0.4%, the S&P 500 index up 0.1%, and the Nasdaq Composite up 1.0%.
Swiss bank UBS noted that share prices for the ‘magnificent seven’ stocks – which comprise Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla – have struggled this week.
‘The average week-to-date move for the ’magnificent seven’ was minus 4.9% since last Friday. The ’magnificent seven’ account for some of the heaviest-weighted constituents within the S&P 500 index, and their earnings announcements this week have been mixed,’ UBS analysts commented.
Chipmaker Nvidia is yet to report its latest quarterly earnings. It does so on November 21. Apple reports its fourth financial quarter results next week Thursday.
In London, gold miner Fresnillo was among those leading the way on the FTSE 100, rising 3.0%. Gold was quoted at $1,981.94 an ounce, higher against $1,978.13.
NatWest was by far the worst performing FTSE 100 stock, losing 12%.
NatWest reported that in the third quarter of 2023, total income rose to £3.49 billion from £3.23 billion a year earlier. Operating pretax profit rose to £1.33 billion from £1.09 billion.
The firm cut its margin outlook for the year, however. It now expects a full-year bank net interest margin ‘to be greater than 3%’. It had previously predicted an outcome below 3.20% ‘with a current view of around 3.15%’.
Eyes were also on the Travers Smith review, which oversaw of the controversial closure of Nigel Farage’s Coutts account.
It said the decision to close Farage’s bank account was ‘lawful’. However, it identified a ‘number’ of shortcomings in how the decision was reached, how the bank communicated with Farage and how it treated his confidential information.
In a negative read across, Lloyds lost 3.4%, Barclays fell 2.3% and Virgin Money gave back 2.2%. OSB Group bucked the trend, adding 4.5%, however.
International Consolidated Airlines Group gained 3.2%.
IAG reported that revenue in the third quarter of 2023 rose to €8.65 billion from €7.33 billion a year earlier. Pretax profit climbed 57% to €1.58 billion from €1.01 billion.
Looking ahead, IAG said it expects ‘2023 to be a year of strong recovery.’ It added that overall customer bookings for the fourth quarter are as expected.
Digital 9 Infrastructure rose 10%, after it said it is assessing a divestment of its entire stake in the Verne Global group of companies.
It said it has received indicative offers from interested parties to syndicate a majority stake in Verne Global to an unnamed ‘strategic capital partner’, with executed terms expected to be announced in the fourth quarter of 2023.
Compared with the syndication, the board believes the proposed transaction would enable the company to ‘accelerate its balance sheet deleveraging, deliver the cash resources necessary for the company and group to strengthen their position, and further maximise shareholder value’.
On AIM, Starvest rose 71%, after the mineral exploration investor proposed cancelling its London listing, frustrated by its shares trading at a ‘substantial discount’.
It said its shares trade at a discount to the value of its underlying investments, including Greatland Gold, which makes up a large majority of its assets.
Starvest recommended returning its interests in Greatland Gold and fellow London listing Ariana Resources to its shareholders through a capital distribution.
Shareholders will vote on the proposal at a general meeting on November 21. If backed, its shares will be cancelled on November 29.
In European equities, the CAC 40 in Paris ended 1.4% lower, while the DAX 40 in Frankfurt closed down 0.3%.
Sanofi closed down 19% in Paris, after the pharmaceutical company reported that revenue decreased 4.1% to €11.96 billion in the third quarter of 2023, from €12.48 billion the year prior, although net income reported that revenue decreased 4.1% to €11.96 billion in the third quarter of 2023, from €12.48 billion the year prior.
It also confirmed its intention to spin off its Consumer Healthcare business by creating a publicly listed entity, which will be headquartered in France. The move is in order to increase its focus on ‘innovative medicines and vaccines’.
In London, GSK and Astra fell 2.8% and 2.6% in a negative read-across.
Brent oil was quoted at $87.63 a barrel at the London equities close on Friday, down from $87.74 late Thursday.
In Monday’s UK corporate calendar, HSBC releases its third quarter results.
The economic calendar for next week has a host of gross domestic product and consumer price inflation reads come out on Monday and Tuesday, including for Germany and the EU. This is followed by a slew of purchasing managers’ index releases across the rest of the week.
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Issue Date: 27 Oct 2023
