(Alliance News) - Stock prices in London closed flat to higher on Friday, as investors dug into the latest US personal consumption expenditures data.
The FTSE 100 index closed down 3.01 points at 8,376.63. The FTSE 250 ended up 55.46 points, 0.3%, at 21,086.54, and the AIM All-Share closed up 0.02 of a point at 772.51.
In the week as a whole, the FTSE 100 was up 1.1%, the FTSE 250 fell 0.1%, while the AIM All-Share fell 0.3%.
The Cboe UK 100 ended down 0.1% at 837.19, the Cboe UK 250 closed up 0.1% at 18,571.05, and the Cboe Small Companies ended down 0.4% at 16,853.47.
"The summer squall of early August has been forgotten, and with US economic data still looking strong, and rate cuts on the way, investors remain confident about the near-term outlook," said IG chief market analyst Chris Beauchamp.
In European equities on Friday, the CAC 40 in Paris ended marginally higher, while the DAX 40 in Frankfurt ended somewhat lower.
The dollar strengthened across the board on Friday as traders scaled back the likelihood of a half-point rate cut, after data pointed to robust US consumer spending.
The Bureau of Economic Analysis said the core US personal consumption index - the Federal Reserve's preferred gauge for measuring inflation - rose 0.2% in July from a month earlier, when it also increased 0.2%. This also aligned with market expectations.
Year-over-year core PCE prices rose 2.6%, unchanged from the previous month, and just below consensus of 2.7%.
The print suggested that inflationary pressures were easing slightly quicker than anticipated, which would typically be expected to put selling pressure on the dollar.
However, analysts were more focused on the robust consumer spending data in July. Real PCE grew 0.4% in July from the previous month, which was slightly above consensus of 0.3%.
"Inflation is on track to hit the 2% target early next year with the latest PCE deflator print giving the green light to a September rate cut. However, consumer spending remains very robust and this may make the Fed reluctant to move aggressively," said ING chief international economist, James Knightley.
"Nonetheless, a soft jobs report on [next Friday] could still tip the odds in favour of a 50bp rate cut," he added.
The pound was quoted at USD1.3155 at the London equities close Friday, softer compared to USD1.3164 at the close on Thursday. Against the yen, the dollar was trading at JPY145.52, firmer compared to JPY145.23.
The euro stood at USD1.1074, down against USD1.1077.
Traders were also weighing up Friday's inflation print from the eurozone, which showed the headline rate slowing to a three-year low in August.
According to Eurostat, consumer prices in the single currency bloc rose 2.2% annually in August, in line with FXStreet-cited consensus. This was slower than the 2.6% rise in July, and the lowest rate since July 2021.
However, services inflation picked up to 4.2% in August from 4.0% in July. This has proven to be an area of concern for the European Central Bank policymakers of late.
Speaking before the figures were released, ECB board member Isabel Schnabel welcomed signs consumer prices were cooling but cautioned that headline inflation "understates the challenges monetary policy is still facing".
In a speech in the Estonian capital Tallinn, she pointed in particular to "persistent price pressures in the services sector".
Stocks in New York mixed at the London equities close, with the DJIA down 0.2%, the S&P 500 index up 0.1%, and the Nasdaq Composite up 0.3%.
Meanwhile, in London, it was a quieter day for company news.
Housebuilders got a boost from house price data and a jump in mortgage approvals.
Across the UK, property values increased by 2.4% annually, picking up pace from 2.1% in July, Nationwide Building Society said. This took the typical house price to GBP265,375.
Additionally, new data showed the number of mortgages approved for home buyers has jumped to its highest level since the month the mini-budget was delivered under then-prime minister Liz Truss.
The Bank of England recorded 62,000 approvals for house purchases in July – the highest total since 65,100 were recorded in September 2022.
Barratt Developments and Vistry both rose 1.0%.
"We're now only 3% shy of the record level reached in the summer of 2022. Rising house prices are of course a double-edged sword, providing comfort to homeowners while delivering despair to those desperately trying to get on the housing ladder," said Laith Khalaf, head of investment analysis at AJ Bell.
"There are a number of factors behind the tick up in the property market, but chief amongst them are falling mortgage rates. The Bank of England has just cut interest rates for the first time since 2020, and expectations of looser monetary policy have been feeding into mortgage rates for some time now. The good news for borrowers is there are more rate cuts pencilled in, with markets expecting base rate to fall to 4% by the summer of next year."
Brent oil was quoted at USD78.83 a barrel at the London equities close Friday, up a touch from USD78.74 late Thursday. Gold was quoted at USD2,505.27 an ounce, down against USD2,519.68.
In Monday's UK corporate calendar, there will be half-year results from equipment rental firm Ashtead Group and first-quarter results from software firm Kainos Group.
Highlights for next week include full-year earnings from Barratt Developments and half-year numbers from Direct Line and M&G on Wednesday, a trading statement from Currys and half-year results from Vistry on Thursday.
The economic calendar for Monday has the latest manufacturing PMIs from major economies including China, Japan, the eurozone, Germany and the UK. Financial markets in the US are closed for Labor Day.
There are also the official government PMIs from China on Saturday.
By Elizabeth Winter, Alliance News deputy news editor, Global services
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