Investors pushed stocks lower following weaker than forecast numbers on growth from the Eurozone, with more hawkish comments out of the US Federal Reserve and lingering worries about China not helping matters.
The FTSE 100 skidded into the weekend, ending near the day’s lows after retreating by 0.98% or 60.40 points to 6,118.28.
For the week – the third straight one in the red – it lost 235.55 points.
Mining shares bounced back despite another day of losses in the commodities space. Three-month copper futures ended 0.6% down at $4,808 per metric tonne on the LME.
Brent oil futures slipped 0.43% to end at $43.87 in ICE trading.
Economic growth in the single currency bloc slowed to 0.3% quarter-on-quarter for the three months to September, with spending by households propping up activity as exports slowed and – surprisingly, according to Barclays – investment in Germany fell.
For economist Apolline Menut, “the key question is the extent to which real fixed investment will take over consumption as a major growth driver, in a situation where global demand could remain depressed for a longer period than currently foreseen.”
Flat GDP growth in Portugal – due to the political uncertainty – was another negative surprise, while the Dutch economy actually shrunk as global trade slowed down.
Fed hike nearer, US rate-setter says
Late in the afternoon, the president of the US Federal Reserve bank of Cleveland, Loretta Mester, added marginally to the downward bias in stocks.
Speaking at The City Club of Cleveland, Mester said the time for the first rate hike was “quickly approaching”.
“Uncertainty about the longer-run destination is not an argument to delay taking the first step.”
Headline US retail sales volumes in the US rose by 0.1% month-on-month in October, half of what was expected, although revisions to the data for previous months made up for that partially, some economists said.
Oil continues to move lower on China concerns
Concerns about China weren’t far from traders’ minds either.
“The lack of a significant pick-up in sequential activity in China’s ‘old economy’ since the collapse during the first quarter of 2015 is of increasing concern to us, given the easing in financial conditions over the past six months,” Goldman Sachs said in a research note sent to clients on 12 November.
According to the International Energy Agency, global oil stocks hit a record near-3bn barrel by end-September. The developed world’s oil watchdog also projected a slowdown in global oil demand in 2016 to a 1.2m barrel per day pace after an increase of 1.8m p/d in 2015.
BHP Billiton confirmed on Friday that there were nine fatalities at the incident at its Samarco Mineração SA joint venture with Brazilian miner Vale SA and said the operating licence for the mine has been suspended. In addition, four people previously unaccounted for have been found, while 19 people remain unaccounted for.
Burberry was lower, with analyst Guillaume Gauville trimming his forecasts for the company’s earnings in fiscal years 2017 and 2018 by 2% on average to reflect currency moves. The Swiss broker reiterated his ‘underperform’ recommendation and target price of 1,250p.
Stock in Rolls Royce was again lower, hit by price target cuts out of JP Morgan, Credit Suisse and RBC. One group of analysts said they were losing count of the company’s profit warnings.
Pearson won a reprieve, edging into positive territory following the recent sharp losses in the company’s stock.
G4S shares slumped after RBC Capital Markets cut its price target on the stock to 210p from 230p, noting that organic growth has slowed of late.
Second half earnings have been motoring at Auto Trader Group, seven months after the classifieds publisher listed. The company – which listed in March in a £2bn IPO – announced on Friday that revenue was up 8% on the previous period to £138.2m, with reported operating profit growing by 23% to £82.9m in the six months to 27 September. The firm’s basic earnings per share from continuing operations increased more than sixfold – from 0.95p in the first half, to 5.98p.
Industrial valve maker Rotork said orders were down 17% in the third quarter due to the slowdown in the oil sector, but was maintaining its full year guidance with revenue in the range of £530m-£555m and adjusted operating profit of £120m-£130m at current exchange rates. Revenue for the third quarter was 18.1% lower.
Housebuilding and construction group Galliford Try said it continues to see good market conditions in all of its businesses and remains confident of achieving its expectations for the current financial year. The company said its housing business, Linden Homes, has enjoyed improved rates of sale of 0.60 units per outlet per week since the start of the financial year, compared with 0.48 for the equivalent period last year, from an average of 75 outlets.
Russian gold and silver producer Polymetal said it was taking 100% control of the Lichkvaz property in Armenia. Polymetal said it had bought the remaining 75% of the property’s holding company for 1.08m Polymetal shares equal to $9.7m or 0.26% of increased share capital.
Luxury shoe-maker Jimmy Choo announced the appointment of Elisabeth Murdoch – daughter of media mogul Rupert Murdoch – as an independent non-executive director. Murdoch is an executive and entrepreneur in the media and technology sectors.
A record glut of oil is set to continue into next year and maintain pressure on prices, the International Energy Agency said on Friday.
Stockpiles stand at a record three billion, the IEA said in its monthly report.
The report has added to falls on European stock markets, with the FTSE 100 shedding close to 1% on Friday.
Frankfurt and Paris also declined following sharp falls in Asian stock markets, with Hong Kong sliding 2.2%.
Investors also reacted to disappointing eurozone growth figures and a slump in commodity prices on the back of weaker demand from China.
Other factors affecting confidence include fears that the Federal Reserve will raise interest rates next month and poor corporate results from heavyweights including Rolls-Royce and E.On this week.
There were no risers on the French market, with aerospace and defence company Safran topping the fallers with a near 6% slide.
Craig Erlam, senior market analyst at Oanda trading group, said: “The market was primed for some form of correction following a good five weeks for investors.”
Growth in the 19-nation eurozone slowed to 0.3% in the third quarter, official figures indicated on Friday, with Germany slowing as France returned to expansion.
“Slower eurozone GDP growth… will intensify already strong belief that the ECB will deliver more stimulus at its December policy meeting,” said Howard Archer, chief European economist at IHS Global Insight.
Oil prices have more than halved in the past 18 months as US shale oil output and a refusal by nations in the OPEC cartel to cut production added to oversupply.
On Friday, Brent crude was down 36 cents, or nearly 1%, at $43.68 a barrel, and US crude was down $1.20, or 2.8%, at $40.55.
Although lower oil prices will lead to a decline in US production next year, the IEA said it would take months to clear the glut.
“This massive cushion has inflated even as the global oil market adjusts to $50 per barrel. Demand growth has risen to a five-year high of nearly two million barrels per day,” the agency said. “Gains in demand have been outpaced by vigorous production from OPEC and resilient non-OPEC supply.”
Growth in global demand for oil is expected to fall in 2016 as the allure of lower prices fades, the IEA added.