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LONDON (Alliance News) - After a strong week, UK equities stumbled on Friday, tripped by another fall in oil prices and unease during the on-going talks in Brussels regarding Britain's position in the European Union.
The FTSE 100 ended down 0.4%, or 21.72 points at 5,950.23 on Friday. This followed a strong start to the week when the blue-chip index recorded four straight sessions of gains, ending on Thursday. This meant the index closed the week up 4.3% or 242.63 points.
The mid-cap FTSE 250 index ended the day down 0.1%, or 18.69 points at 16,158.06 and the AIM All-Share rose 0.2%, or 1.23 points to 683.77.
In Europe, the CAC 40 in Paris ended down 0.4% and the German DAX 30 closed down 0.8%.
EU leaders were hunkering down Friday for a new round of efforts at a reform deal that is meant to keep Britain in the trading bloc, amid reports that consensus was proving difficult to achieve on the key issues of contention.
The stakes are high, with the EU hoping that a reform package will convince Britons that they should vote for their country to stay a member, in a referendum that is widely expected to take place this year. But the Brussels talks have run into overtime, with leaders insisting that an agreement cannot come at any price.
British Prime Minister David Cameron stressed that he would only agree to a deal "if we get what Britain needs", while EU President Donald Tusk spoke Thursday of a "make or break summit".
Later Friday, Cameron tweeted "a cabinet meeting won't be possible tonight. One will be held if and when a deal is done".
Many worry that a Brexit would destabilise the EU and reduce the bloc's global influence, at a time when it is already struggling with a migration crisis and enduring economic woes.
Economists at Berenberg are confident a deal can be secured, saying the economic case for Britain to maintain its guaranteed access to the biggest common market in the world is overwhelming, but the key risk is the immigration issue.
"Whether or not the deal is sealed tonight or with some extra fanfare shortly afterwards, Europe's time-tested compromise machine is likely to deliver a deal soon," Berenberg said.
On Wall Street, at the London equities close, the Dow 30 was down 0.2%, the S&P 500 was flat and the Nasdaq Composite was up 0.5%.
A report by the US Labor Department showed the consumer price index was unchanged in January after edging down by 0.1% month-on-month in December. Economists had expected prices to dip by another 0.1%.
The unchanged reading came as a steep drop in energy prices was offset by increases from most of the other major index components. On an annual basis the index accelerated by 1.4%, ahead of expectations for a 1.3% rise, and faster than the pace seen in December of 0.7%.
Core consumer prices, which exclude food and energy prices, rose by 0.3% month-on-month in January following an upwardly revised 0.2% increase in December. Core prices had been expected to inch up by 0.1%, matching the uptick originally reported for the previous month. The increase in January was the biggest since August of 2011 and partly reflected notably higher prices for shelter and medical care.
"We do not view the report as indicating an abrupt shift in the inflation environment, but it certainly supports the common view among Federal Reserve officials that inflation will return to target over the medium-term," said Michael Moran, chief economist at Daiwa Capital Markets.
The dollar appreciated following the data, but by the London stock market close the euro had made up its losses to trade at USD1.1121, compared to USD1.1088 at the corresponding period on Thursday.
The pound did not fare as well at the euro, and at the close it was quoted at USD1.4325 versus USD1.4331 on Thursday. This was despite data showing UK retail sales rose at their fastest pace in more than two years in January as post-Christmas price cuts boosted demand for clothing and computers.
A report from the Office for National Statistics said sales rose 2.3% from the previous month, which was much bigger than the 0.7% gain economists had forecast. The latest growth was the largest since December 2013, when sales rose 3%. The decline seen in December 2015 was revised to 1.4% from 1%.
A late decline in oil prices took its toll on stocks, with Brent oil trading at USD33.07 a barrel at the London stock market close, compared to USD34.34 a barrel on Thursday. US benchmark West Texas Intermediate fell below the USD30 a barrel line to USD29.48, down from USD31.00 at the same time on Thursday.
"Tumbling oil prices are once more acting as a constraint to FTSE bulls, and there is a feeling that energy prices could provide a drag on UK investor sentiment for some time to come," said Joshua Mahony, market analyst at IG.
The price of gold continued its strong recent run, trading at USD1,230.61 an ounce at the close on Friday, compared to USD1,217.39 on Thursday.
This saw gold miners Fresnillo and Randgold Resources both close amongst the best performers in the FTSE 100, up 1.4% and 1.9% respectively.
In UK corporate news, Coca-Cola HBC closed as the best performer in the FTSE 100, ending up 2.7% as it beat market expectations, reporting growth in profit in 2015 as volumes increased in all of the markets in which it operates, but revenue continued to be hit by unfavourable movements in foreign exchange rates, as anticipated.
The soft drinks bottling company made a pretax profit of EUR357.1 million in 2015, up from EUR352.0 million in 2014, despite net sales revenue slipping to EUR6.35 billion from EUR6.51 billion.
Shore Capital analyst Phil Carroll said pretax profit came in better than both Shore's and the market's expectations.
Coca-Cola HBC said volume grew 2.6% in the full year, following a 2.8% decline the prior year, as strong underlying trends continued into the fourth quarter, particularly in the sparkling, water and juice categories. Coca-Cola HBC also bottles other still drinks, such as energy and tea drinks.
Shares in Essentra closed as one of the biggest gainers in the FTSE 250, up 11%. The plastic and fibre products company said its pretax profit dropped in 2015 due to one-off costs, but its revenue rose and it hiked its dividend as its non-oil and gas-exposed business performed well. Essentra also gave a positive outlook for 2016.
Essentra said its pretax profit for the year to the end of December fell to GBP90.4 million from GBP99.7 million, primarily due to one-off write-offs which hit its operating margin. These mostly related to the acquisition of Clondalkin Specialist Packaging and subsequent site rationalisation measures.
Essentra will pay a final dividend of 14.4 pence per share, up from 12.6p a year earlier, pushing its total dividend for the year to 20.7p, up 13%.
After the market close Friday South African based furniture and household goods retailer Steinhoff International Holdings made a 175p bid for Home Retail Group, trumping an offer from J Sainsbury that implied a price of around 161.3p agreed earlier this month. Shares in Home Retail closed down 1.2% at 153.38p.
In the economic calendar for Monday, MNI business sentiment indicator for China is at 0145 GMT, just before the Nikkei manufacturing purchasing managers' index at 0200 GMT.
There are then a number of flash Markit manufacturing, composite and service purchasing managers' index readings for a number of countries. France is at 0800 GMT, Germany is at 0830 GMT, the eurozone is at 0900 GMT and US manufacturing PMI is at 1445 GMT. Elsewhere, the Confederation of British Industry's industrial trends survey is at 1100 GMT and the Chicago Federal Reserve's national activity index is at 1330 GMT.
A busy week in the UK corporate calendar starts with HSBC Holdings' full-year report which is released at 0400 GMT on Monday.
At 0700 GMT, there are full-year results from housebuilder Bovis Homes Group, renewable energy infrastructure investor Greencoat UK Wind and developer and manufacturer of critical power control sub-assemblies XP Power.
There are also interim results from diamond miner Petra Diamonds, veterinary pharmaceutical company Dechra Pharmaceuticals, while owner of discount fashion retailer Primark and of British Sugar Associated British Foods releases a trading statement.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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