London close: Stocks turn sour in afternoon trading

London’s markets turned lower on Friday afternoon, concluding a volatile week on a negative note.

The FTSE 100 index finished the session down 0.3%, closing at 7,572.58 points, while the FTSE 250 experienced a decline of 0.21%, ending the day at 19,062.32 points.

In currency markets, sterling was last up 0.07% on the dollar to trade at $1.2626, while it weakened 0.01% against the euro, changing hands at €1.1706.

“While the Nasdaq 100 and S&P 500 are making new record highs, the latter topping the 5,000 mark, European stock indices found it difficult to keep up and have had a slightly negative end to the week,” said IG senior market analyst Axel Rudolph.

“The FTSE 100 in particular suffered a third straight day of losses ahead of next week’s UK unemployment, inflation, fourth quarter GDP and retail sales data.”

Rudolph said that while US natural gas prices tanked to a 12% weekly fall amid near-record production, oil prices rallied by more than 5%.

“The rejection of ceasefire proposals between the Israeli Defence Force and Hamas concerned investors regarding possible supply disruptions and led to the price surge which is likely to continue if tensions remain high in the region.

“Last week’s inflows into the US dollar have given way to some outflows in the course of this week during which several Fed members have re-iterated the Fed’s cautious stance regarding rate cuts.”

Inflation eases in Germany, BoE member warns against rate cuts

In economic news, German inflation in January eased to 2.9%, aligning with initial estimates, according to fresh official data.

The figure marked a decline from December’s 3.7%, primarily attributed to a significant drop in energy costs.

Energy inflation plummeted to -2.8% from 4.1% in December, despite the removal of caps on energy prices and the implementation of a higher carbon tax.

Food price hikes continued to decelerate, reaching 3.8% compared to December’s 4.6%, though still notably higher than the overall inflation rate.

“Overall, energy prices across key components remained relatively sticky at the start of the year – this is especially true for gas and electricity, considering the sharp decline in wholesale gas prices through 2023,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics.

He emphasised downside risks for energy prices, even with the rise in carbon dioxide taxes from €30 to €45 per tonne.

On home shores, the Bank of England was in focus after Jonathan Haskel, an external member of the Monetary Policy Committee, cautioned against interest rate cuts, emphasising the necessity of further evidence indicating inflation control.

Haskel, who voted for a rate hike last week, highlighted the importance of persistence in addressing inflation concerns.

Despite recent inflation declines, including a drop to 4% in December from a peak of 11.1% in October 2022, Haskel stressed the need for additional evidence before altering his stance.

Current interest rates stood at a 15-year high of 5.25%, with the majority of analysts anticipating a potential rate cut later in the year.

However, at the recent MPC meeting, Haskel and fellow member Catherine Mann voted for a rate increase to 5.5%, citing ongoing worries about inflationary pressures.

The majority opted to maintain rates unchanged, with Haskel describing his decision as “finely balanced.”

The Bank of England anticipates headline inflation to reach its long-term 2% target in the spring before rising again by year-end.

ConvaTec jumps on peer’s results, Legal & General slides

On London’s equity markets, ConvaTec Group stood out with a 1.88% increase in its stock, following positive interim results from its Danish counterpart Coloplast.

Supermarket giant Tesco managed gains of 0.04% after finalising the sale of its retail banking business to Barclays for £600m.

Tesco also announced a strategic partnership with Barclays to market financial services under the Tesco brand.

The move was expected to generate further revenue, with the majority of proceeds likely to be returned to shareholders through share buybacks.

BAE Systems recorded a 1.21% uptick following the pricing of the initial public offering (IPO) of Air Astana, a Kazakhstan-based carrier in which BAE Systems holds a 49% stake.

The IPO valued Air Astana at $847m.

Bellway managed to recover from earlier losses with a 0.28% increase, after the housebuilder reported a decline in half-year housing revenue, which was in line with expectations.

On the downside, Legal & General Group declined 3.11% after Citi reduced its earnings per share estimates for 2023.

Citi also initiated a ‘negative catalyst watch’ ahead of Legal & General’s full-year results in March, citing potential earnings per share downgrades.

Polymers specialist Victrex saw a 2.98% decrease after the company announced a sluggish start in the first quarter due to continued weakness in end markets and challenging year-on-year comparatives.

Reporting by Josh White for Sharecast.com.

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