The FTSE 100 was broadly flat on Friday with US stocks firmly in the driivng seat and dicatating trade in Europe.
US stocks fell in heavy volume trade overnight as the NASDAQ once again slid. The NASDAQ closed down 1.7% overnight and the S&P 500 ended the day off 1.18%.
Much better than expected Q3 US GDP had sent markets into a frenzy as traders scrambled to align portfolios with the possibility of another Fed rate hike, and interest rates staying higher for longer.
When US indices lose so much ground overnight, it is very difficult for European shares to start with any meaningful positivity.
However, strong numbers from Amazon after the bell steadied the ship, sparking a rally in US futures and helping support European stocks.
The FTSE 100 was down just 7 points to 7,346 at the time of writing on Friday.
“The FTSE 100 was steady despite more selling in the US overnight as a positive after hours update from Amazon helped improve the market’s mood,” said AJ Bell investment director Russ Mould.
“A steady performance from the e-commerce and, particularly, the AWS cloud business helped reassure investors. AWS is the real profit engine of the group and there was a risk an uncertain economic backdrop might have affected demand from clients. Solid sales and margins here will therefore be positively received.
“Later on the market will be watching the US Federal Reserve’s preferred measure of inflation – personal consumption expenditures – ahead of its next meeting to decide interest rates on 1 November.”
Natwest
Natwest was the FTSE 100’s top faller on Friday after the UK bank said net interest margins fell in the third quarter and Natwest lower NIM guidance for the year.
Natwest rounds off a week of increasingly dire updates from UK banks starting with Barclays earlier in the week. Lloyds Q3 offered minor positivity before Standard Chartered disappointed shareholders with write downs of their Chinese assets.
“The details of NatWest’s third quarter results may initially have been pushed into the background by admissions of failure over its treatment of Nigel Farage,” Russ Mould said.
“An independent review found shortcomings in decision-making and communication, and it comes at a point where market conditions are becoming less favourable.”
“Investors didn’t take long to turn their attention to an equally damaging profit downgrade. Guidance on the net interest margin has been lowered as any benefit from higher interest rates seems to be evaporating.
“Competition for savings and mortgage products, coupled with some regulatory pressure, means the banks are no longer seeing such a big gap between what they charge on borrowings compared with what they pay out for deposits.
Netwest shares were down 10.8% shortly after midday in London. Lloyds and Barclays were down 2.7% and 1.8% respectively in sympathy.
Prudential was the top gainer, rising 3%, on chatter about potential Chinese stimuls.
With many of the FTSE 100’s heavyweights still to report, next week promises further choppiness in London’s leading stocks.
