London close: Shares finish off lows amid another sell-off in US tech
London stocks fell sharply on Friday as sentiment was undermined by disappointing earnings from US tech companies and declines for Rolls-Royce and RBS.
By the end of trading, the FTSE 100 was down 0.92% to 6,939.55, while the pound was edging higher by 0.19% against the dollar to 1.28372 and flat versus the euro at 1.1272.
For the week, the top flight index shed 1.6% to 6,939.56, alongside a drop of 1.5% in cable to 1.28268 as a result of the build-up in political uncertainty amid the UK's withdrawal from the European Union.
Brent also finished the week sharply lower, losing 2.9% to end at $77.45 a barrel by the end of the trading day in London.
Losses for crude oil materialised as several well-known equity strategists cautioned clients that another leg lower for US stocks might lay ahead as the Federal Reserve continued to tighten policy. Nevertheless, in the case of Brent, several top-ranked analysts, including Sova Capital's Head of Quantitative Investment Strategies Group, Konstantin Brownstein, believed that it might yet set fresh highs over the course of the first half of 2019.
Earnings from tech giants Amazon and Alphabet set the tone for trading throughout the session on Friday. Although Amazon topped the earnings per share forecast for the third quarter, it fell short on revenues and guidance. Meanwhile, Google parent Alphabet surpassed quarterly earnings per share estimates but missed revenue forecasts.
Amazon shares were down a whopping 8% as of the London close, while Alphabet slumped 3%, with the Dow Jones Industrials staging a retreat of 1.42% and the S&P 500 off by 1.76% and on the verge of entering so-called 'correction' territory.
"Global markets are closing out a memorable week, with sharp losses across the board taking the S&P 500 into negative territory for the year. US markets already had a pessimistic tone coming into today’s session, given the disappointing Amazon and Alphabet figures released yesterday," said Josh Mahony at IG.
"The dominant dollar has gained further ground today, with the stronger than expected US GDP reading helping boost the greenback. Safe havens have been in vogue amid this flight to safety, and the role of the dollar as a haven is doing little to help boost US stocks. Interestingly, we have seen the internationally focused FTSE 100 significantly underperform it’s domestic FTSE 250 counterpart, despite the decline in the pound.
There were no major UK data releases on Friday but in the US, the Department of Commerce reported that third-quarter domestic product slowed to a quarterly annualised rate of 3.5%, marking a slowdown from 4.2% growth in the second quarter.
Although better then the 3.5% rate of expansion that economists had penciled-in, economists highlighted the weak reading on non-residential fixed asset investment.
"The weak spot in today’s report was business fixed investment, with structures, equipment and residential investment all slowing considerably in Q3. This suggests that the corporate tax cuts have not induced much capital accumulation," said economists at Barclays Research.
In individual company news, Rolls-Royce tanked after Bloomberg said the aerospace and defence giant has told its staff that it is far short of engines for the new Airbus A330neo jet and will only be able to deliver 10 of the 30 targeted engines by the end of the month.
Royal Bank of Scotland was in the red as third-quarter attributable profit of £448m came in short of City consensus of £507m and the bank warned of a more uncertain outlook.
Mining conglomerate Glencore fell as it said third-quarter copper production rose and lifted its full-year copper guidance, but cut its full-year oil output guidance, while Segro ticked a touch lower after saying it has exited the Belgian market.
On the upside, British Airways and Iberia parent IAG was the standout gainer as its third-quarter operating profit and revenue beat estimates.
Retirement products company Just Group was the standout gainer on the FTSE 250 a day after the Prudential Regulation Authority said it had delayed a decision on changing capital requirements for equity release mortgages. Broker Numis said this was good news for Just Group as three year phase-in would have been challenging.
In broker note action, Burberry was lifted to 'hold' from 'reduce' at HSBC, while Lloyds Banking Group was lifted to 'neutral' from 'underperform' by Macquarie. 888 Holdings was upgraded to 'hold' from 'sell' by Investec and ConvaTec was cut to 'neutral' from 'buy' at UBS.
Market Movers
FTSE 100 (UKX) 6,939.56 -0.92%
FTSE 250 (MCX) 18,352.90 -0.96%
techMARK (TASX) 3,212.27 -1.34%
FTSE 100 - Risers
Randgold Resources Ltd. (RRS) 6,416.00p 3.52%
Paddy Power Betfair (PPB) 6,530.00p 2.27%
Associated British Foods (ABF) 2,397.00p 1.96%
CRH (CRH) 2,170.00p 1.54%
Marks & Spencer Group (MKS) 287.60p 1.02%
Rentokil Initial (RTO) 295.80p 0.68%
Next (NXT) 5,162.00p 0.55%
Smurfit Kappa Group (SKG) 2,524.00p 0.48%
Diageo (DGE) 2,685.00p 0.47%
British American Tobacco (BATS) 3,619.00p 0.30%
FTSE 100 - Fallers
Evraz (EVR) 503.00p -6.33%
Ocado Group (OCDO) 780.80p -5.00%
BT Group (BT.A) 229.60p -4.55%
Royal Mail (RMG) 348.70p -4.10%
Royal Bank of Scotland Group (RBS) 224.90p -4.09%
WPP (WPP) 874.00p -4.04%
Micro Focus International (MCRO) 1,198.50p -3.77%
Ferguson (FERG) 4,990.50p -3.73%
Smith (DS) (SMDS) 366.00p -3.02%
Scottish Mortgage Inv Trust (SMT) 462.85p -2.85%
FTSE 250 - Risers
Just Group (JUST) 90.00p 7.91%
Mediclinic International (MDC) 348.60p 3.14%
Weir Group (WEIR) 1,436.00p 2.70%
Diploma (DPLM) 1,216.00p 2.27%
Millennium & Copthorne Hotels (MLC) 469.00p 1.96%
Domino's Pizza Group (DOM) 269.70p 1.81%
Provident Financial (PFG) 509.40p 1.72%
Vivo Energy (VVO) 114.00p 1.59%
Hunting (HTG) 668.00p 1.35%
888 Holdings (888) 182.70p 1.22%
FTSE 250 - Fallers
Avast (AVST) 261.75p -7.18%
Travis Perkins (TPK) 997.00p -7.00%
Amigo Holdings (AMGO) 225.50p -6.04%
Metro Bank (MTRO) 2,076.00p -5.72%
Superdry (SDRY) 710.00p -5.52%
IG Group Holdings (IGG) 568.50p -5.49%
FDM Group (Holdings) (FDM) 820.00p -5.42%
Sophos Group (SOPH) 408.61p -4.82%
SIG (SHI) 107.70p -4.69%
Baillie Gifford Japan Trust (BGFD) 747.00p -4.60%