Markets end week cautious over mixed messages
Positive assessments from the Bank of England versus tough trading in China left investors scratching their heads
Markets ended the week on a cautious note, unsure whether to take comfort in the Bank of England’s comments on Thursday that banks were able to withstand a no-deal Brexit, or run for the hills following disappointing data from China.
In the end, they settled for a lacklustre middle ground, as the FTSE 100 closed down 3.85 points at 7,505.97, a move of just 0.1%.
Europe had a similar experience, with the Cac 40 in France down 0.4% and the German Dax 30 off by 0.1%.
David Madden, market analyst at CMC Markets, explained: “Chinese imports fell by 7.3% in June, which exceeded the 4.5% fall that economists were anticipating, and that underlines the poor demand levels in the second-largest economy in the world.”
He added: “The FTSE 100 was in positive territory for much of the day, but as mining stocks drifted lower, so did the equity benchmark.”
Chris Beauchamp at IG said he believed the upcoming data due out of the US next week is also playing on investors’ minds.
He said: “A sense of exhaustion pervades markets, after a week that has seen wild swings in expectations for the upcoming Fed meeting, while the imminent arrival of earnings season will also prompt some understandable caution with US indices at record highs.”
Citigroup, JPMorgan, Goldman Sachs, and Wells Fargo all put out their latest results next week, and they will be closely watched by stock pickers around the world.
It was a better day on the currency markets for the pound, however, as it strengthened against the dollar and the euro.
A pound is now worth 1.115 euros, up 0.19%, and worth 1.2557 dollars, up 0.26%.
Mr Madden said: “(The pound) extended its gains from yesterday when the Bank of England financial stability report stated the UK banking system can withstand a disorderly Brexit.
“Sterling has been in a downward trend since April, and if the wider bearish move continues it might retest the 1.2440 region.”
In company news, shares in Thomas Cook plunged 60% to 5.38p as bosses confirmed talks with its largest shareholder over a deal which would effectively hand over control of the company – wiping out everyone else.
The firm’s creditworthiness was also downgraded by ratings agency S&P from CCC+ to CC.
Advertising agency WPP continued its disposal spree, announcing plans to sell a majority stake in marketing analysis business Kantar.
The deal values Kantar at more than £3 billion, with £1 billion to be returned to shareholders. Shares closed up 6.2p at 961.4p.
Insurance giant Hiscox took a hit after issuing a profit warning, saying the rise in natural disasters was hitting profits.
Shares initially fell 5%, but ended the day down 2.1%, or 37p at 1,707p.
A profit warning also hit listed car dealership Lookers, which said the tough market would continue through the year. Shares closed down 8.3%, or 3.85p at 42.5p.
The biggest riser on the FTSE 100 was Persimmon up 86.5p, or 4.6%, to 1989.5p following a decent set of results from house builders during the week.
It was followed by DS Smith, up 11.5p at 367p; Burberry up 53.5p at 2,005p; Smurfit Kappa up 68p at 2,610p and Mondi up 46p at 1,774p.
The biggest FTSE 100 faller was Just Eat – off 14.8p at 612p, despite revealing a £16 million deal to buy corporate food delivery business City Pantry.
It was followed by Hiscox; DCC down 102p at 6,840p; Diageo down 43.5p at 3,391p and the Scottish Mortgage Investment Trust down 6.5p at 550.5p.