The FTSE 100 felt the pressure of poor technology earnings in the US on Friday while a warning from NatWest hit sentiment around UK stocks.
The FTSE 100 was down 0.4% to 7,043 at the time of writing and remained above the key psychological support level of 7,000.
“Having held the line for most of this week the FTSE 100 finally caves to the negative pressure from big tech disappointments across the pond,” said AJ Bell head of investment analysis, Laith Khalaf.
“The FTSE 100 may be underrepresented on the technology front but the wider hit to sentiment from some of the world’s largest companies dropping the ball couldn’t be entirely avoided.”
US Tech Stocks
As Khalaf points out, the FTSE 100 had been largely immune to a string of poor updates from Meta, Alphabet and Microsoft the week but a sharp decline in Amazon shares proved too much on Friday.
Amazon provides an excellent insight into the health of the global consumer and their soggy outlook suggests economic strife in the coming months.
“The wider concerns from last night’s results point to a weakening economy, which although we’ve been warned about, still have the ability to spook the market when we see the tangible effects. The world’s largest retailer took investors by surprise last night with an utterly bleak outlook for sales, while profits could do a disappearing act because of fierce competition and soaring inflation,” said Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown.
NatWest’s third quarter update confirmed economic conditions were becoming ‘challenging’ in the UK, despite the bank enjoying higher revenue in the last quarter.
A trend has been established in companies posting relatively good Q3 numbers, but signalling clear concerns about the outlook for the rest of 2022 and early 2023.
The UK consumer
NatWest’s outlook corroborates economic predictions from economists, central banks and other corporates that we are in for a tough time in Q4.
This was reflected in weaker UK consumer stocks on Friday. JD Sports was 2.9% weaker while the UK housebuilders were broadly lower.
Ocado shares are highly sensitive to news on the propensity of Uk consumer spending and didn’t take some of NatWest’s comments well. Ocado shares were down 3.5% at the time of writing.
NatWest shares were unsurprisingly the worst performer on Friday sinking over 9%. FTSE 100 banks fell in line with NatWest with Lloyds dipping 3.5% and Barclays giving up 3%.
Both banks had reported this week but were not as pessimistic on the outlook as NatWest.