UK and Europe
European shares moved between narrow gains and losses throughout Friday, taking direction from the US benchmark indices which were pulling back from a trifecta of record closes.
Stocks had initially opened lower after weak industrial production and retail sales data from China offered further evidence its economy is slowing. China’s economy has been showing signs of a slowdown since the start of the second quarter. Markets have been unperturbed since it has heightened speculation for a more accommodative stance from the country’s central bank.
Mid-morning gains were led by a rise in energy company shares after Denmark’s Maersk surpassed earnings expectations and oil prices made a two-week high. As the afternoon rolled around, the failure of US markets to retake Thursday’s record highs weighed on global risk sentiment.
The FTSE 100 struck a fresh 14-month high above 6900 but slipped back under its own weight after six consecutive winning days. Marks and Spencer (LON:MKS) as well as Britain’s biggest supermarkets were amongst the top risers whilst mining firms acted as the biggest drag after the weak Chinese data weighed on the outlook for commodity demand.
Shares of AP Moeller Maersk rose on Friday despite the company reporting a painful 88% slump in earnings year-over-year. The abandonment of large swathes of capex spending by big oil companies has hit Maersk’s oil and container divisions hard. Nonetheless, the firm has responded by slashing costs, thus improving its efficiency and beating lowered analyst forecasts.
US
US stocks opened lower on Friday following the “trifecta” of record closes for the S&P 500, Dow Jones and Nasdaq Composite.
Shares of retailer JC Penney (NYSE:JCP) rose after it reported a rise in like-for-like sales in the second quarter whilst cutting its net losses in half. Shares gave back some of the initial gains, having already jumped on Thursday with the retail sector after results from Macy’s (NYSE:M) and Kohl’s (NYSE:KSS).
Shares of Dow Chemical (NYSE:DOW) and DuPont (NYSE:DD) fell following a probe from competition regulators in Brussels over the two companies’ intended merger.
FX
US retail sales growth for July was a disappointment, causing a drop in the US dollar which dominated the FX market on Friday. US retail sales stalled with 0% m/m growth in July, missing expectations of a 0.4% rise and last month’s 0.6%.
EUR/USD regained 1.12 and USD/JPY fell below 101 on the belief that sluggish retail sales gives the Federal Reserve one more reason to be cautious on raising rates.
The euro was higher on Friday, but gave back some gains after data showed Eurozone GDP growth remains on track, growing 0.3% q/q in the second quarter, matching flash estimates. Signs of a two-tier economy have reappeared again.
Germany shouldered more of the gains as Italy stalled. The German economy grew by 0.4% q/q in the second quarter, above expectations but below 0.7% from Q1. The Italian economy stalled with 0% growth, down from 0.3% in the first quarter.
Commodities
The weak US economic data sent commodity prices broadly higher on Friday. The exception was copper, which suffered a decline on expectations of weaker commodity demand as a result of a slowdown in Chinese industrial production.
Gold rose above $1350 per oz for the third day running, building on the gains brought about by record ETF demand amidst investor uncertainty. Oil prices continue to run higher despite data showing rising US stockpiles on expectations that a meeting next month between producers could result in an output freeze.
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