31st Jan 2014 17:25
LONDON (Alliance News) - The FTSE 100 has closed lower Friday, with large companies most exposed to emerging markets leading the falls as continued concern over an EM growth slowdown fuels a global flight to safety. Having fallen for eight of the last nine trading sessions, the UK's leading share index has recorded its worst monthly performance since June - losing 3.5%.
The FTSE 100 has closed down 0.4% at 6,510.44, the FTSE 250 has closed down 0.2% at 15,674.37, while the AIM All-Share has gained 0.2% to 857.72.
Major European markets also fell, with the French CAC40 closing down 0.3% and the German DAX losing 0.7%.
After the European close, stocks continue lower on Wall Street, with all major US markets down about 0.5%.
As stock markets around the globe slide, a continued slowdown in eurozone inflation leads to an increased speculation of another cut in interest rates from the European Central Bank at next week's policy meeting.
Eurozone consumer price growth slowed again in January, growing at just 0.7% year-on-year, down from the 0.8% growth seen in December, according to the advance estimate of CPI inflation released by Eurostat Friday. Economists had expected the reading to accelerate slightly to 0.9%.
Eurozone unemployment was marginally more encouraging, coming in unchanged at 12.0% in December, beating expectations of an increase in to 12.1%. A look at the country breakdown of that number highlights the major issue for the eurozone, with German unemployment at 5.1% but Spain at 25.8%, for example.
Despite the outperformance of the German economy compared to its neighbours, retail sales in the country fell unexpectedly in December. Sales fell 2.5% in real terms from a month ago, reversing November's 0.9% rise, falling well bell the expected 0.2% increase.
"If German consumers don?t feel confident to spend, given the performance of their economy, what hope for the rest of Europe?" said Michael Hewson, Chief Market Analyst at CMC Markets.
With the ECB meeting to set interest rates on Thursday, "the odds of a rate cut in the coming week have shortened substantially," said economists at Lloyds Bank.
The euro came under some selling pressure in the wake of the generally poor data for the region Friday, slipping about half a cent against the dollar to USD1.3500. The pound also lost a little ground against the greenback, which has seen gains across the board as the traditional safe-haven currency, currently trading at USD1.6445.
Some afternoon data from the US gave the dollar a further boost, with both the Chicago Purchasing Managers Index and the Michigan Consumer Sentiment Index ever so slightly beating economist expectations.
Personal income in the US remained flat between November and December, however personal spending rose by 0.4%, according to afternoon data from the Bureau of Economic analysis. The readings suggest that the US consumer is either running up more debt or running down their savings.
Within UK equity movers, the defensive tobacco stocks were amongst the best performers Friday, helped out by Imperial Tobacco receiving a ratings upgrade to Buy from Goldman Sachs. Imperial Tobacco closed up 1.7%, with British American Tobacco closing up 0.6%.
BT was the stand out blue chip gainer however, closing up 3.1% after saying that its revenues increased by 2.0% in the fourth-quarter, boosted by the roll-out of its new sports package.
Bank of America Merrill Lynch saw what it called "a stampede" out of equity exchange traded funds this week, with USD6.4 billion flowing out of its emerging market equity funds, the most since August 2011. This trend was evidenced on the FTSE 100, where the biggest losers were those with emerging market exposure.
The beverages sector was hit hard for the second day in a row. Diageo closed down 1.2% and SABMiller closed down 1.0%, while Coca-Cola HBC was the heaviest FTSE 100 faller, closing down 3.2%. Aberdeen Asset Management also ended down 2.8%.
Looking to next week, Monday brings full-year results from Anglo American and fourth-quarter results from Randgold Resources. An interim statement is also expected from Flybe, amongst others.
The economic focus of the coming week will likely be the potential action of the ECB on Thursday, while the Bank of England's MPC will sit on the same day. Ahead of that, Monday brings a round european Manufacturing PMI's, although markets will likely take early direction from the Chinese non-manufacturing PMI released before the European open.
By Jon Darby; [email protected]; @jondarby100
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