Share prices in Europe recovered some ground on Friday, paring recent losses, though an end to post-new year optimism and a bout of investor caution will be what this week will be remembered for.
The year started with optimism over inflation and hope of an easing of rate hikes by central banks, economic data has led to recessionary fears.
Data is suggesting a slowdown is occurring in the US - with numbers on Friday showing its housing market is continuing to be hit. Consumer data from the UK was similarly unimpressive on Friday, though shares in London-listed retailers ended higher.
The FTSE 100 index closed up 23.30 points, 0.3%, at 7,770.59. The FTSE 250 rose 128.52 points, or 0.7%, at 19,702.63, and the AIM All-Share rose 3.93 points, or 0.5%, at 856.02.
For the week, the FTSE 100 lost 0.9%, the FTSE 250 gave back 1.3% and the AIM All-Share gave returned 1.0%.
The Cboe UK 100 ended up 0.2% at 777.04 on Friday. The Cboe UK 250 rose 0.7% at 17,225.22, and the Cboe Small Companies added 0.1% at 13,982.67.
In European equities on Friday, the CAC 40 in Paris closed up 0.6%, while the DAX 40 in Frankfurt added 0.7%.
The euro stood at $1.0837 at the time of the European equities close on Friday, higher against $1.0795 on Thursday. Against the yen, the dollar was trading at JP¥129.88, higher compared to JP¥128.45.
Sales of existing homes in the US have fallen for the 11th straight month, as a rough period of limited inventory and high mortgage rates persists, according to industry data released Friday.
The past year also logged the lowest annual sales rate since 2014, with a sizeable decline in unit sales not seen since the Great Recession period, said the National Association of Realtors.
Sales of all types of homes and condos slipped 1.5% from November to December, hitting a seasonally adjusted annual rate of 4.0 million, the NAR said.
While December’s annual rate was better than expected, sales were still 34% down from December 2021.
‘2022 was a battle over inflation and how high interest rates would go. 2023 is turning into a battle over recessionary conditions and how much negative news is priced into stocks and bonds. There is wide disagreement on both, leading to an even cloudier picture for investors,’ analysts at Tower Bridge Advisors commented.
Fresh economic data painted a gloomy picture about the UK economy, meanwhile.
According to the latest data released by the Office for National Statistics, UK retail sales volumes are estimated to have fallen by 1.0% in December from November.
Markets had expected retail sales volumes to rise by 0.5% monthly in December, according to FXStreet.
In addition, GfK’s UK consumer confidence indicator dipped to a near-historic low in January.
The pound was quoted at $1.2379 late Friday in London, up from $1.2363 on Thursday.
Retail shares largely shook-off the poor data, which has been at odds with largely positive post-Christmas updates from the sector. JD Sports added 2.8%, among the best FTSE 100 performers.
Asos jumped 11% after Bank of America lifted the online fashion retailer to ’buy’ from ’underperform’. Peer boohoo rose 8.5% after BofA upped it to ’buy’ from ’neutral’.
The stronger pound hit international earners however, with AstraZeneca and Diageo, two of the FTSE 100’s largest constituents, falling 1.9% and 0.3%.
While larger peers shone, retailer In The Style tumbled 29%. The seller of womenswear fashion expects a swing to a loss for the year ending March 31.
In The Style expects annual revenue ‘to be in region’ of £46 million, down 19% from £57.3 million a year ago.
It anticipates an adjusted loss before interest, tax, depreciation and amortisation between £4.3 million and £4.8 million, swinging from an adjusted Ebitda of £551,000 a year ago.
Elsewhere in London, Spirent dropped 19% as it noted some hesitance among its clients for the first half of 2023.
The firm explained that global economic conditions have caused some of its customers to delay their investment decisions in the new year. As a result, it now expects its annual performance to have a ‘heavier than usual’ weighting towards the second half of 2023.
In 2022, however, the provider of testing, analytics and security for telecommunications networks said its results were in line with expectations.
Close Brothers gave back 11%. The merchant bank said it expects to recognise an additional provision in its interim financial statements against the Novitas loan book of up to £90 million.
In 2021, Close Brothers decided to permanently cease the approval of lending to new customers across all the products offered by Novitas and withdraw from the legal services financing market.
Brent oil was quoted at $86.55 a barrel late Friday in London, up from $85.36 late Thursday. Gold was quoted at $1,925.41 an ounce, higher against $1,919.03.
Stocks in New York were higher at the time of the equities close in London. The Dow Jones Industrial Average was up 0.5%, the S&P 500 climbed 0.9%, and the Nasdaq Composite surged 1.4%.
Alphabet’s ’A’ stock was up 4.6%. Google’s parent company said it will cut around 12,000 jobs, the latest major technology firm to slash its workforce.
Alphabet’s Chief Executive Sundar Pichai said in an email sent to staff: ‘I have some difficult news to share. We’ve decided to reduce our workforce by approximately 12,000 roles.
‘I take full responsibility for the decisions that led us here.’
The CEO said the lay-offs are global, impacting US employees immediately, and will affect teams across the company.
Alphabet joins Microsoft, Salesforce, Facebook-owner Meta Platforms and Amazon in imposing job cuts as the world economy heads into a downturn.
Netflix added 6.5% on the back of forecast-topping subscriber growth and a change at the top.
Netflix said it added 7.7 million subscribers in the fourth quarter of 2022, markedly beating a forecast of 4.5 million, though slowing from 8.3 million a year earlier.
The streaming service said its founder, Reed Hastings, will switch from co-chief executive to executive chair. The move mirrors those of other tech founders, such as Amazon’s Jeff Bezos.
Joining Ted Sarandos as a co-chief executive is operating chief Greg Peters.
The company also reiterated its intention to use revenue growth as its key growth metric going forward, rather than subscriber adds.
Financial markets in Shanghai and Hong Kong are closed on Monday for the Lunar New Year holiday. Shanghai is closed for the whole week, while Hong Kong re-opens on Thursday. The week picks up pace with a series of flash PMIs on Tuesday and a Bank of Canada interest rate announcement on Wednesday.
Monday’s local corporate calendar has half-year results from cannabinoid medicines-focused firm Oxford Cannabinoid Technologies and a trading statement from Tritax Big Box REIT.
Over in New York, Microsoft reports half-year results on Tuesday, aerospace company Boeing and electric carmaker Tesla post annual numbers on Wednesday, before oil major Chevron on Thursday.
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