European markets, including the FTSE 100, closed lower on Friday, concluding a week in negative territory. This followed the release of US consumer inflation data, which indicated a slower pace of price increases than anticipated. Conversely, US stocks, initially opening lower, rallied by midday. This article provides a summary of key market movements and economic data releases impacting investor sentiment.
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UK retail sales figures for November also emerged, along with an update on the nation’s public finances. The Office for National Statistics (ONS) reported a rebound in retail sales, rising by an estimated 0.2% after a 0.7% decline in October. This growth was primarily driven by food purchases, partially offset by weaker demand for clothing. Notably, the data excluded Black Friday sales.
Market Performance Across Europe and the US
- The FTSE 100 (^FTSE) ended the day down 0.1%.
- Germany’s DAX (^GDAXI) declined 0.3%.
- France’s CAC 40 (^FCHI) slipped 0.2%.
- The pan-European STOXX 600 (^STOXX) fell 0.8%.
US markets presented a contrasting picture, buoyed by encouraging Personal Consumption Expenditures (PCE) inflation data. This key inflation indicator, favored by the Federal Reserve, showed a month-over-month decrease in price increases for November. While inflation remains persistent, the slowdown provided a glimmer of hope in the central bank’s battle to reach its 2% target. Specifically, the core PCE index, excluding volatile food and energy costs, rose by 0.1% in November, slightly below the 0.2% increase predicted by economists.
Consequently, major US indices saw gains:
- The Nasdaq Composite (^IXIC) climbed 1.3%.
- The S&P 500 (^GSPC) advanced 1.3%.
- The Dow Jones Industrial Average (^DJI) rose 1.3%.
UK Economic Updates: Public Finances and Retail Sales
Beyond retail sales, the ONS revealed that UK government borrowing decreased to £11.2 billion in November, the lowest November figure in three years. This was significantly below economist forecasts of £13.3 billion and marked a £3.4 billion reduction compared to November of the previous year. The ONS attributed this positive development partly to lower central government debt interest, which reached a five-year low of £3 billion for November, influenced by fluctuations in the Retail Price Index (RPI).
Danni Hewson, Head of Financial Analysis at AJ Bell, commented on the retail data, suggesting that consumer caution persisted even after the recent budget announcements.
Conclusion
Friday’s market activity highlighted the ongoing sensitivity to inflation data and its impact on investor confidence. While cooler US inflation figures spurred a rebound in US equities, European markets remained subdued. The UK’s positive news on public borrowing and resilient retail sales provided a brighter spot but failed to fully offset broader market concerns. As we move forward, market participants will continue to closely monitor economic indicators for signs of sustained inflationary pressures and their potential implications for future monetary policy decisions.
