12th Sep 2014 15:46
LONDON (Alliance News) - The UK's main stock indices held on to slim gains Friday, despite major European equity markets suffering from a fresh round of sanctions on Russia and US markets heading lower in the run up to next weeks Federal Reserve policy meeting.
The debate over Scottish independence also remained a key market driver Friday, with the pound being knocked up and down with every opinion poll that revealed a small shift in the opinion of the Scottish electorate in the run up to next weeks all-important referendum.
The FTSE 100 closed up 0.1% at 6,806.96, while the FTSE 250 closed up 0.6% at 15,711.85, and the AIM All-Share closed down 0.2% at 774.56. The indices opened higher, and then flat-lined for the rest of the day.
New sanctions against Russia were imposed by EU leaders Friday, despite the ceasefire in the east of Ukraine appearing to hold. At the time of the European close, the US Treasury department has also said that it is expanding its own sanctions, targeting Russia's largest bank, Sberbank of Russia, five defence companies and five Russian energy firms, including Gazprom.
News of the sanctions weighed on major European markets. The French CAC 40 closed fractionally down, and the German DAX closed down 0.4%.
After the European close, Wall Street was also lower, with the DJIA down 0.2%, and the S&P 500 down 0.3%. The weakness in US stocks comes despite afternoon data showing that US retail sales expanded by 0.6% month-on-month in August as expected, while consumer sentiment rose to its highest level of the year, according to the Michigan sediment index.
The US markets are already focused on the upcoming Federal Reserve meeting on Wednesday next week, amid speculation that policy makers may be about to shift to a more hawkish tone and remove the words "considerable time" from the statement that indicates how long it will be appropriate to maintain emergency interest rates for.
That same speculation saw the US dollar make broad gains Friday, erasing most of the early gains made by the pound. Sterling had risen to USD1.6277 late Thursday after a poll conducted by YouGov for the Times and Sun newspapers showed the "No" campaign had regained some ground ahead of next week's independence referendum. The poll showed 52% of voters that had made up their mind supporting the union, compared with 48% that will be voting for a split.
The pound has been increasingly volatile this week as the Scottish vote nears, and Sterling took a knock later in the day when a YouGov/Guardian poll showed that voters who have decided are split 51% "No", to 49% "Yes". At the time of the European equity market close, the pound trades at USD1.6227.
The Bank of England announced Friday that governor Mark Carney will cut short a meeting of G20 finance ministers in Australia next week so he can be back in the UK in time for the vote.
"The worst part of all of this is the fact that no one really knows what will happen if Scotland votes for independence and it’s that uncertainty that is freaking people out," said Alpari market analyst Craig Erlam.
Many analysts still believe that a "Yes" vote remains unlikely. History shows that voters tend to be more moderate at the polling booth than at opinion polls.
"It is easier to support a momentous change when talking to a pollster than it is when the decision really counts, in the polling booth," said chief UK economist at Bereberg Rob Wood.
Barclays investors cheered the announcement of the new Chairman. The bank ended months of speculation by saying David Walker will be replaced by John McFarlane at the company's annual general meeting next year. McFarlane will step down from his current positions on the boards of Aviva and FirstGroup to take the position. Since McFarlane joined Aviva as chair in September 2011, the insurers shares have risen some 83%. Barclays shares gained 2.0% on the news Friday.
FTSE 250-listed AVEVA Group lost a quarter of its value Friday after warning that it now expects its revenue to be between GBP84 million and GBP90 million in the first-half of its current financial year, well below the previous consensus expectation of GBP107 million. AVEVA said results have been hit by the strength of sterling and the timing of key engineering, procurement and construction rental renewals. Analysts say that a huge amount of AVEVA's revenue growth in recent years has been on the back of capital expenditure by the oil and gas majors, something that has been under increased scrutiny recently. AVEVA closed down just over 25%.
Anglo American lost almost 0.8% after saying that it will suspend its Canadian coal operations at the end of the year due to a continued slump in coking coal prices.
The price of gold continued south Friday, reaching its lowest level since early January of USD1,227.70 per ounce. Oil prices also remain subdued, with a barrel of Brent at almost its cheapest level in two years, currently USD97.05.
Monday brings a relatively quiet start to a very important week for the UK economy and the global markets. The big event domestically is clearly the Scottish independence referendum, for which polls open at 0700 BST on Thursday, when sterling traders will be glued to the exit polls. The major global market event of the week will be Wednesday evening's Fed meeting.
Chinese retail sales and industrial production data will be released over the weekend, as will the latest Rightmove UK house price index.
By Jon Darby; [email protected]; @jondarby100
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
BarclaysAnglo AmericanAvivaRightmoveAVV.LFirstgroup