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.

Natwest shares tanked on Friday morning after announcing disappointing Q3 trading results punctuated by falling net interest margins and lower profits compared to the previous quarter.

Natwest’s results mark the end of a busy week for banking results.

Barclays results were poor, Lloyds were reasonable, Standard Chartered will hope their Chinese business picks up, and on Friday, Natwest’s results were pretty terrible.

Shares in Natwest were down around 10% at the time of writing as key operation metrics deteriorated.

Compounding the pressure on Natwest, they admitted failings around account closures and announced a raft of measures to investigate. The bank’s leadership will hope today’s admission Natwest are conducting internal reviews into account closures will draw a line under the Farage debacle.

“NatWest has been in a pickle of late following a series of governance issues. Along with third-quarter results, NatWest also released findings from stage 1 of its review into the account scandal following the closure of Nigel Farage’s Coutts account. The independent review found no legal breach, but did pick up on several governance concerns with how the decision was reached – something I think we already knew,” said Matt Britzman, equity analyst at Hargreaves Lansdown.

Although the Farage saga has attracted public interest, it has little to do with the sharp fall in Natwest shares today.

Q3 results were poor. Lower net interest margin (NIM) is a major concern with a material drop to 2.94% from 3.11% before the Bank of England has even suggested cutting rates.

Reducing net interest margin guidance for the full year will be a kick in the teeth for investors.

Profitability is also a concern. Operating profit before tax fell to £1.33bn in Q3 compared to £1.77bn in Q2. The drop in key profitability metrics was the result of rising competition and pressure on the mortgage business.

“Back to results, they were largely disappointing as net interest margin dipped below 3%, and the outlook was lowered. Deposit levels did grow, which is a positive sign that NatWest is pricing itself at the right levels to attract customers searching for higher rates,” said Britzman.

“That trend’s plain to see, with longer-term cash balances jumping to 15% of the book – compared to 11% last quarter. But it’s less profitable business than non/low-interest current accounts. Add in mortgage headwinds as highly profitable business written over the pandemic rolls off, and that’s caused the hit to net interest margin.”

In a small positive, Natwest mirrored other FTSE 100 banks in setting aside less than expected for bad debts.

“As we’ve seen across the sector this week, the consumer remains resilient. Charges taken in anticipation of loan losses were a little lower than expected. Higher borrowing costs are being offset by proactive finance management, wage growth and a strong labour market.”

The FTSE 100 was trading in negative territory on Thursday after the US released bumper GDP growth for the third quarter.

Although the FTSE 100 was down 0.3% at the time of writing, the index was off the worst levels of the day as markets digested a blowout 4.9% increase in US GDP in the third quarter.

Equity markets are expected to remain choppy for the rest of the session as investors weigh positive news for the US economy and what it means for the Federal Reserve and the trajectory for interest rates.

In the Eurozone, the European Central Bank voted to keep rates on hold on Thursday and said rates were expected to remain higher for longer.

The European session had started on the back foot following pessimistic US technology earnings overnight.

“The fall-out from a disappointing performance from Google-owner Alphabet’s cloud division continues as a wider tech sell-off feeds into the performance of European markets on Thursday,” said AJ Bell head of financial analysis Danni Hewson.

“When you consider the negative reaction to Meta Platforms’ warning of weaker ad spend, despite, like Alphabet, posting better-than-expected earnings, then hopes big US tech might continue to drag markets higher on its back are starting to look increasingly forlorn.

“It is notable that, thanks to their extremely strong run, beating earnings expectations is not, in itself, proving enough to support share prices. Investors are looking beyond the headlines to see just how healthy the outlook really is for these businesses.”

Earnings season is also in full swing in London, with Standard Chartered, WPP and Unilever reporting on Thursday. All three were firmly in the red at the time of writing.

Standard Chartered was the FTSE 100’s biggest faller, giving up 10%, in reaction to falling net interest margins and a sharp drop in profits. Their problems stemmed from China and provisions for bad debts related to Chinese property.

“Standard Chartered, the Asia-focused bank, is one of the biggest fallers on the index, dropping like a stone after its pre-tax profits fell 33% in the third quarter. Shareholders are clearly very disappointed by this sharp reversal of fortunes compared to the second quarter. Its exposure to China, where it’s expanded rapidly, is its weakest link, with the real estate sector buckling under a mountain of debt,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

WPP is struggling with slow advertising spending by large US technology companies and Unilever’s volumes fell in the most recent quarter.