The FTSE 100 was slightly weaker on Friday as investors took a step back from equities and assessed what has been a busy week for economic data, politics and corporate updates.
London’s flagship index was down 0.4% at the time of writing amid heavy selling of European equities that continued declines on the back of a surprise snap French elections that threatens to provide a platform for far-right nationalists that are opposed to the European project. The French CAC plummeted 2.5% as the German DAX fell 1.3%.
Heavy selling of European stocks followed reasonably robust US trading overnight, which helped the FTSE 100 swerve most of the European downside on Friday.
“Yes, we’ve seen several days of choppy trading on the markets but a robust session on Wall Street last night and resilience on the FTSE 100 at the end of the trading week doesn’t portray a picture of an investor with their head in their hands,” said Russ Mould, investment director at AJ Bell.
There has been a clear divide this week between mainland European stocks trading on political concerns and US and UK that continue to be driven by interest rate expectations.
Interest rate hopes
The Federal Reserve provided little insight into the timing of interest rate cuts at this week’s meeting, which would have disappointed some market participants.
That said, CPI data provided a dash of optimism that inflation was falling and the Federal Reserve would soon have the right economic conditions to warrant a cut.
This optimism kept a lid on any selling of US stocks, and investors are likely to remain positioned for a rate cut by sticking with long equity bets in the coming weeks and months. Strength in US stocks – should it be maintained – will help support UK equity sentiment in the coming week as investors look forward to the Bank of England’s interest rate decision on Thursday.
Tesco
Tesco was the made corporate story of the day with the group proving it has what it takes to fight of discount rivals amid the cost of living crisis by producing 4.6% sales growth in its last quarter.
“The UK’s biggest supermarket, Tesco, has announced trading is in-line to hit full year expectations,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.
“Crucially, in the first quarter, volumes continued to grow, which is an important milestone during slowing inflation. The emphasis on value for money is evident and has become markedly more pronounced in recent times. This is helping to attract and retain customers, but doesn’t come cheap. Convincing customers to put a higher number of items in their trolley is therefore the aim of the game. There’s recently been a launch of summer menu items, which sounds good in theory, but the very poor weather could put a pin in that BBQ-flavoured balloon.”