13th Sep 2013 16:10
LONDON (Alliance News) - The pound hit an eight month high against the dollar Friday after disappointing US economic data pushed the dollar lower against most major currencies, but London's main stock indices suffered another day trading in tight ranges.
US retail sales came in weaker than expected and consumer sentiment fell to its lowest level since April Friday.
The US Michigan Consumer Sentiment Index came in at 76.8, against a forecast 82 and 82.1 previously, the first consecutive monthly drop in 14 months and the biggest deviation from expectations on record.
Retail sales, meanwhile, rose 0.2% in August, down from an upwardly revised 0.4% increase in July and well below the 0.4% increase expected by markets.
The FTSE 100 had just about ticked up into positive territory in afternoon trade, making a high of 6,481.29, but was sent tumbling on release of the US consumer sentiment index to lows of the day, hitting 6,561.78. The blue-chip market recovered from the shock to end the day just 0.1% down at 6,583.80. The FTSE 250 closed slightly higher, up 0.2% at 15,220.09 and the AIM All-Share closed close up just 0.1% at 780.12.
The FTSE 100 has none-the-less closed up on the week for the second consecutive week having fallen each week in August.
Equity markets are subdued as US and Russian officials remain deadlocked on a resolution to the Syrian chemical weapons handover and ahead of next week's Federal Reserve monetary policy meeting.
US Secretary of State John Kerry and Russian counterpart Sergei Lavrov are into the second day of talks in Geneva on destroying Syria's chemical weapons stockpile, but they have failed to agree on several points and the meeting may have to continue into the weekend, diplomats said.
The diplomatic delays caused gold and oil prices to fall further. The price of a barrel of Brent dipped below USD111.00 a barrel Friday for the first time in three weeks, while gold is at a one month low, currently about USD1,318 an ounce.
The lower commodity prices led mining and oil stocks lower, the FTSE 350 sector indices posting the biggest losses Friday.
Airline stocks, which would normally gain as the price of oil falls, were also among the biggest decliners as Aer Lingus following in the footsteps of Ryanair by issuing a profit warning. The Irish flag carrier said that a fall in bookings during July and August and fierce competition that is forcing down fares means it is likely to miss its earnings forecast.
Air Lingus shares have dropped 6%, while Ryanair lost 0.2% and easyJet lost 1.6%. International Consolidated Airlines Group, the British Airways parent, ended down 0.6%.
Next week, the Fed's FOMC monetary policy committee meeting will take centre stage, with a two-day meeting starting Tuesday and policy announcements made Wednesday.
The poor US data Friday has damped expectations that the Fed will begin reducing economic stimulus programmes earlier than it has suggested, but it remains in the balance as to whether Ben Bernanke will begin to slow asset purchases this month or not.
Wednesday also brings the release of the Monetary Policy Committee minutes from the Bank of England, which will be watched with interest as sentiment continues to build in the market that the central bank will also move sooner that it is forecasting to reduce stimulus and start raising rates.
By Jon Darby; [email protected]; @jondarby100
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