28th Aug 2020 17:01
(Alliance News) - A rousing speech from Bank of England Governor Andrew Bailey did little to lift the FTSE 100 on Friday, as the large cap index was weighed down by a stronger pound.
The dollar slipped after US Federal Reserve Chair Jerome Powell struck a dovish tone at the Jackson Hole economic symposium on Thursday. Speaking via webcast, Powell said inflation can now stay above the 2.0% target "for some time" before the Fed will need to act by raising interest rates.
Powell said the US central bank will tolerate a higher inflation rate in order to stimulate jobs growth. The news hurt both the greenback and the internationally-exposed FTSE 100 index.
The blue-chip index lost 36.42 points, or 0.6% at 5,963.57 on Friday, ending the week down 0.8%.
The mid-cap FTSE 250 index added 28.78 points, or 0.2% at 17,790.81, ending the week up 1.7%. The AIM All-Share index closed up 0.42 of a point at 963.76. The index added 0.7% this week.
The Cboe UK 100 index ended down 0.7% at 593.89. The Cboe 250 rose 0.4% to 15,168.79. The Cboe Small Companies ended marginally lower at 9,494.28.
In mainland Europe, the CAC 40 index in Paris ended down 0.3%, while the DAX 30 in Frankfurt slipped 0.5%.
"Suffering from yesterday's Jackson Hole address from Jerome Powell, and down against the yen following Shinzo Abe's resignation, the greenback had another rough session," Spreadex's Connor Campbell said.
"Sterling's swagger knocked the FTSE to the floor," Campbell added.
Sterling fetched USD1.3347 at the London equities close, up sharply from USD1.3192 late Thursday.
The euro stood at USD1.1900, up from USD1.1798 at the European equities close Thursday.
Bailey took the stage at the Jackson Hole economic policy symposium on Friday afternoon. The Bank of England's governor said that the central bank is "not out of firepower" to support the economy, following the dramatic shock caused by the coronavirus pandemic.
Bailey told that the bank has more ammunition left and that major bond-buying drives are more effective following major crises.
He said: "We are not out of firepower by any means, and to be honest it looks from today's vantage point that we were too cautious about our remaining firepower pre-Covid. In the decade ahead, I think we need to take on board the message the Covid crisis has reiterated, namely that our tools may be state contingent in their effects.
"And with that in mind, let's not ignore the need to manage central bank balance sheets to enable such state contingency to take effect. There are times when we need to go big and go fast."
Against the yen, the dollar was trading at JPY105.26, down from JPY105.72 late Thursday.
Japanese Prime Minister Shinzo Abe announced Friday he will resign over health problems, in a development that kicks off a leadership contest in the world's third-largest economy.
Abe is expected to stay in office until his ruling Liberal Democratic Party can choose a successor, in an election likely to take place among the party's lawmakers and members. Likely replacements include Finance Minister Taro Aso and Chief Cabinet Secretary Yoshihide Suga.
In London, blue-chip gold miners Fresnillo and Polymetal International were among the better performers, tracking the precious metal higher. The duo closed up 2.9% and 4.5%, respectively.
Bullion benefited from a weaker dollar and fetched USD1,968.01 at the local equities close, up from USD1,919.95 late Thursday.
A barrel of brent changed hands at USD45.78 at the London equities close, up from USD44.68 late Thursday, but eased from USD45.86 earlier in the session. The North Sea benchmark reached highs above the USD46 mark this week as Hurricane Laura gathered pace.
"Oil has given up some of the recent hurricane-related gains following Laura making landfall yesterday. Laura quickly weakened to a tropical storm and appeared not to have caused any significant damage to Texas or Louisiana's oil infrastructure," AxiCorp analyst Stephen Innes said.
Towards the bottom of the large caps, Rolls-Royce shed another 3.6% as the jet engine maker extended losses from Thursday. The stock had closed down 1.2% on Thursday after Rolls-Royce said it was looking to sell assets, amid a gaping loss and a warning of "material uncertainties" caused by the coronavirus pandemic.
Also towards the bottom of the large-cap bourse was ITV, shedding 1.4%. The next index quarterly review will be based on share prices at market close on Tuesday and the broadcaster has been widely-tipped to lose its spot in the FTSE 100.
"September should have been a month of celebration for ITV as it marks the 65th year since the iconic TV company was founded, instead it could be retiring from the FTSE 100. It will be no birthday surprise as ITV's been in the drop zone for some time now. The Love Island broadcaster's revenue has fallen dramatically as companies have cut advertising spend during the coronavirus pandemic," Hargreaves Lansdown Senior Investment & Markets Analyst Susannah Streeter said.
"Looking forward, the continued investment into ITV Hub, Britbox and the advertising platform Planet V could prompt a turnaround if ITV is able to meet its objective of transforming into a digitally led media and entertainment company."
Elsewhere in London, FTSE 250-listed Essentra closed 1.6% lower, after it cancelled its dividend and reported a drop in half-year earnings. The plastic and fibre products manufacturer was hit by the Covid-19 pandemic.
The company did not declare an interim dividend, having paid a dividend of 6.3 pence last year. Essentra said it will keep under review the possibility of a resumption of dividends for 2020.
For the six months ended June 30, Essentra posted pretax profit of GBP8 million, crashing down 85% year-on-year. This was on revenue which fell 12% to GBP448 million.
Guarantor loans provider Amigo Holdings advanced 16%. It posted a sharp drop in first-quarter earnings after granting payment holidays to borrowers.
For the first quarter ended June 30, revenue was down 32% to GBP48.8 million and pretax profit tumbled to GBP1.4 million from GBP22.6 million.
The news came just one day after its disgruntled founder James Benamor made his formal bid to return.
After the London market close on Thursday, Amigo had said it received a general meeting requisition notice from Benamor's Richmond Group for appointing Benamor as a director of the company.
The notice also proposed removal of Chief Financial Officer Nayan Kisnadwala, Interim Chair Roger Lovering and Chief Executive Glen Crawford as directors of Amigo and resolutions in relation to Amigo's unit Amigo Loans.
Amigo on Friday said Richmond had withdrawn the resolution to remove Crawford.
Stocks in New York were higher at the London close. The Dow Jones Industrial Average and the S&P 500 were both 0.3% and the Nasdaq Composite advanced 0.6%.
Soft drinks behemoth Coca-Cola gained 1.7% but warned of thousands of job losses as the Covid-19 pandemic hit sales.
Coca-Cola Co announced Friday it will cut 4,000 jobs in North America as part of a reorganisation following a rough second quarter in which Covid-19 slashed profits. The iconic American brand, that owns dozens of juice, water and soft drink labels, said it plans to cut down to nine business units from 17 currently, but will offer severance packages to employees costing between USD350 million and USD550 million.
Financial markets in London are closed on Monday for the bank holiday. In the early hours however, there are preliminary retail and industrial production prints from Japan.
The data calendar picks up pace on Tuesday with manufacturing PMI prints from the UK, eurozone, US, China and Japan.
Tuesday's local corporate calendar has half-year results from lender Old Mutual and broadcaster STV Group.
By Eric Cunha; [email protected]
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