(Alliance News) - Stock prices in London closed lower on Friday, as investors digested a hot US inflation report ahead of a busy week of central bank updates.
Despite a third successive daily decline, London's flagship FTSE 100 posted a weekly rise, shaking off a backdrop of virus concerns.
"European markets have spent most of the last two days consolidating the gains of the first two days of this week, with the FTSE 100 set to close out the week, with its best weekly gain since January, and back where it was prior to the sell-off, in the wake of concerns over the Omicron variant," CMC Markets analyst Michael Hewson commented.
"Does that mean that Omicron concerns are over? That's a harder question to answer given the implementation of new restrictions across Europe, the UK and in some parts of the US in response to higher infection rates. There is a concern that some governments are over-reacting, running the risk of making supply chain problems worse at a time when their economies are struggling to recover."
The FTSE 100 index ended down 29.48 points, or 0.4%, at 7,291.78. The mid-cap FTSE 250 index fell 220.33 points, or 1.0%, at 22,927.71. The AIM All-Share index closed down 5.47 points, or 0.5%, at 1,190.95.
The FTSE 100 ended the week 2.4% higher, the FTSE 250 advanced 1.2% this week and the AIM All-Share added 0.8%.
The Cboe UK 100 index ended down 0.3% at 723.78. The Cboe 250 closed down 1.0% at 20,332.93, and the Cboe Small Companies lost 0.5% at 14,962.51.
In mainland Europe, the CAC 40 stock index in Paris ended down 0.2%, while the DAX 40 in Frankfurt closed down 0.1%.
Ahead of the latest interest rate decision by the Federal Reserve, data on Friday showed US inflation raced to another historic high, giving the central bank something to digest.
Annual US consumer prices rose at the fastest pace since the Reagan administration against a backdrop of rising demand and supply chain disruptions, figures from the Department of Labor showed.
On an annual basis, the US consumer price index rose 6.8% in November, accelerating from 6.2% rise in October. The reading was in line with the market forecast, cited by FXStreet, and was the largest 12-month increase since June 1982.
"There appears to have been palpable relief that this afternoon's US inflation numbers for November came in as expected, at 6.8%, which while still at a 39 year high, wasn't nearer to some of the worst estimates which could have seen it rise above 7%. This appears to have helped put a floor under markets ahead of next week's Fed meeting," CMC's Hewson added.
At the time of the closing bell in London, equities in New York were mixed. The three major benchmarks started the session positively but have since faced selling pressure. The Dow Jones Industrial Average was flat at the London close, the S&P 500 was 0.3% higher and the Nasdaq Composite was down 0.1%.
US President Joe Biden on Thursday, ahead of the US inflation release, downplayed its importance.
Voter confidence in Biden has taken a hit with inflation at 30-year highs and a supply chain crisis that threatens the availability of food and other essential goods as the holiday season gets underway.
In an unusual statement released ahead of the data, Biden said Thursday the report will not encompass declines in prices of energy and used cars, two drivers of the high inflation readings in recent weeks.
"The information being released tomorrow on energy in November does not reflect today's reality, and it does not reflect the expected price decreases in the weeks and months ahead, such as in the auto market," Biden said.
The dollar was mixed on Friday. The euro was priced at USD1.1314 late Friday, lower from USD1.1332 on Thursday. Against the Japanese yen, the dollar was trading at JPY113.28, down from JPY113.52.
The pound was quoted at USD1.3235 at the London equities close on Friday, up from USD1.3191 on Thursday.
Sterling was largely unhurt by numbers on Friday showing sluggish economic growth in the UK.
UK gross domestic product advanced 0.1% in October from September, slowing from month-on-month growth of 0.6% in September. The October print missed the market estimate, cited by FXStreet, of 0.4%. The ONS said the UK economy remains 0.5% below its pre-coronavirus pandemic level.
The slow growth figure will likely fuel expectations the Bank of England will keep interest rates on hold once again next Thursday.
ThinkMarkets analyst Fawad Razaqzada commented: "The European Central Bank, like the Fed and BoE, is also faced with rising inflation rates in the eurozone. But the ongoing spread of Delta, couple with the new threat of the Omicron variant, means it will most likely do nothing at this meeting as policymakers assess the potential economic damage of tighter restrictions that have been introduced in parts of the region to combat the spread of coronavirus."
Monday's economic calendar has machinery orders from Japan and the latest Rightmove UK monthly house price index overnight. The latest Fed interest rate decision is on Wednesday, before updates from the Bank of England and European Central Bank on Thursday.
In London, British American Tobacco closed the best blue-chip performer, rising 2.5%, during a strong session for defensive stocks. Consumer goods firm Unilever added 0.8%.
Gambling stocks continued to struggle in London, as the sector faces increased regulatory scrutiny in the UK. Ladbrokes owner Entain fell 2.9%, while 888 lost 3.5%.
In a speech on Wednesday, UK gambling minister Chris Philp hinted at the imposition of affordability checks for punters.
"To be workable and prevent harm, affordability checks need to be proportionate. As the Commission has said, demanding payslips or bank statements from every customer spending GBP100 or so is likely to be unwelcome, disruptive and disproportionate to the risks. But there is a level that is appropriate," Philp said.
Elsewhere in London, photo booth operator Photo-Me International advanced 4.7%.
Photo-Me credited a recovery across most of its key markets for leading to an upgrade to annual earnings forecasts.
Revenue is now forecast slightly ahead of previous expectations at around GBP210 million, and pretax profit before exceptionals is expected at the upper end of previous guidance at between GBP25 million and GBP30 million.
On AIM, ASOS dropped 6.0% after UBS slashed its price target for the stock by 24% to 3,040.00 pence from 4,000.00p. It reiterated its Neutral recommendation.
ASOS shares closed at 2,370.50p.
Brent oil was quoted at USD74.64 a barrel late Friday, down from USD75.22 on Thursday evening. Gold stood at USD1,785.71 an ounce, up against USD1,777.03.
Monday's local corporate calendar has a trading statement from recruitment agency SThree and annual results from drug development firm C4X Discovery.
By Eric Cunha; ericcunha@alliancenews.com
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