10:00am: FTSE 100 down

The FTSE 100 fell 0.6% or over 66 points to 10,749, while the FTSE 250 is down over 22 points or 0.09% at 24,330.

The FTSE 100 is lower on Friday mainly because investors are taking some profit after Thursday’s 1.2% rally and reassessing the outlook for interest rates.

The FTSE 100 closed 1.2% higher at 10,816.14 on Thursday, its strongest session in recent trading, so Friday’s modest decline looks partly like consolidation after the sharp advance.

The Bank of England (BoE) held Bank Rate at 3.75% on Thursday, but its statement was more hawkish than the decision suggested.

On Friday, the Bank of Japan raised its policy rate to 1.25%, a 31-year high, as it sought to contain inflationary pressures linked to higher oil prices and other global factors.

The widely expected move failed to support the yen, which weakened as investors focused on two dissenting board members who opposed the increase.

Brent crude fell around 1% to $103.83 a barrel early on Friday, extending a two-day decline.

The drop came as investors weighed fresh clashes between Saudi Arabia and Yemen’s Houthi rebels against signs that Saudi Arabia could bring additional crude to global markets, easing supply concerns.

Surprisingly, UK retail sales volumes rose 0.5% in August, following a 0.5% fall in July and a 0.6% rise in June.

Sales volumes were up 2.4% compared with August last year.

Non-store retailers partially recovered from July’s decline, attributed to promotions being brought forward into June.

Department stores also picked up in August, following stock availability problems the previous month.

Retailer shares were broadly lower on Friday, with Next down 3.4%, Sainsbury’s down 1.4%, Tesco down 1.3% and Kingfisher down 0.7%, despite stronger-than-expected UK retail sales in August, suggesting the positive data has not translated into immediate buying across retail shares.

Nestle S.A. (OTC:NSRGF, SIX:NESN), the Swiss maker of Nescafé and KitKat, said on Friday it was assessing all options to protect its rights after Russia moved to seize control of its local operations.

A presidential decree signed by Vladimir Putin on Thursday placed Nestlé’s Russian assets under temporary administration, transferring management to a Russian company called L.E.V. Management.

Nestlé said it remained committed to protecting its rights and ensuring continuity of operations for the benefit of stakeholders, particularly its employees.

Market reaction was immediate. Nestlé shares fell 1.0% to 77p, after opening at 77p compared with a previous close of 78p, with no intraday high or low available.

Taoiseach Micheál Martin is meeting UK Prime Minister Andy Burnham in Manchester on Friday, their first meeting since Burnham took office in July.

Martin is the first international leader to visit No 10 North, Burnham’s new Downing Street outpost in the north of England.

The leaders are discussing Northern Ireland, trade, and November’s planned EU-UK summit.

Chancellor John Healey will tell EU finance ministers not to lock Britain out of a programme designed to shield European industries from unfair Chinese competition.

The chancellor is expected to make the case at a meeting of counterparts in Dublin on Friday, pressing for closer UK-EU cooperation on technology, defence and manufacturing.

Softcat PLC (LSE:SCT) has raised gross proceeds of approximately £354 million through an equity issue, comprising 18,742,590 new shares issued at 1,890p each.

The 1,890p placing price represents a 4.0% discount to Softcat’s closing price of 1,968p on Thursday.

The net proceeds will partly fund Softcat’s acquisition of GDT Topco and transaction-related costs.

 

9.00 am: Telecoms lead the decline

The FTSE 100 fell 58 points, or 0.5%, to 10,758, near its session low of 10,754.

Telecommunications stocks dominated the fallers as part of a sector-wide retreat across Europe. Airtel Africa dropped 6.8%, while BT Group and Vodafone declined 3.4% and 3.3%, respectively.

Consumer shares also weakened, with Coca-Cola HBC down 4.1% and Next losing 3%.

The FTSE 250 slipped 0.1%, while the AIM All-Share bucked the wider decline with a 0.4% gain.

 

8.15 am: Miners provide early support

The FTSE 100 fell 32 points, or 0.3%, to 10,784 shortly after the opening bell, having traded between 10,771 and 10,802.

Miners provided support as gold gained 0.7% to US$4,431.62 an ounce and copper rose 0.6% to US$6.65 per pound.

Endeavour Mining led the blue-chip risers with a 1.7% advance, while Fresnillo gained 1.4% and Antofagasta added 0.7%.

Brent crude dropped 2.2% to US$102.49 a barrel.

7.00 am: Retail sales rebound as London eyes flat opening

The FTSE 100 is expected to open broadly unchanged on Friday despite an overnight rally on Wall Street and a rebound in UK retail sales.

London’s blue-chip index was called at around 10,816, little changed from Thursday’s close of 10,816.14. The index gained 1.2% during the previous session after the Bank of England held interest rates and paused active gilt sales.

UK retail sales volumes rose 0.5% in August, reversing July’s 0.5% decline, according to the Office for National Statistics.

Sales were 2.4% higher than a year earlier and increased 0.9% in the three months to August compared with the preceding three months.

Online retailers partially recovered from July’s decline, while department stores benefited from improved stock availability. Fuel sales fell as higher prices prompted motorists to reduce journeys or put less petrol in their vehicles.

The figures could support retailers at the opening bell, although they also provide the Bank of England with further evidence that consumer activity remains resilient.

The Bank held its benchmark rate at 3.75% on Thursday by a six-to-three vote, with the three dissenting policymakers favouring a quarter-point increase. Several members who backed no change indicated they could support higher rates if the energy shock spreads into wages and domestic prices.

Wall Street rebounded overnight as oil prices and government bond yields retreated. The S&P 500 gained 1.2%, the Nasdaq Composite rose 1.7% and the Dow Jones added 0.6%, or 316 points.

The US ten-year Treasury yield eased to around 4.93%, helping technology and other rate-sensitive shares recover following Wednesday’s Federal Reserve interest-rate increase.

Asian markets were mostly higher. Japan’s Nikkei 225 climbed around 1.9% after the Bank of Japan raised its benchmark interest rate by 25 basis points to 1.25%, its highest level in 31 years.

South Korea’s Kospi gained approximately 2.3%, while Hong Kong’s Hang Seng and China’s Shanghai Composite advanced around 0.7% and 1%, respectively.

Australia’s ASX 200 finished virtually unchanged, slipping 1.2 points, or 0.01%, to 8,731.20. The index climbed as high as 8,771.60 before surrendering its gains and touching a session low of 8,717.

Brent crude fell around 1.3% to US$103.43 a barrel, potentially weighing on BP and Shell while easing pressure on airlines, retailers and other energy-intensive companies.

Gold rose 0.8% to approximately US$4,376 an ounce. Copper eased 0.2% to US$6.57 per pound but remained supported by improving Chinese demand and longer-term consumption expectations linked to electricity grids, renewable energy and data centres.

Bitcoin advanced approximately 1.5% to US$77,560, recovering from the pressure that followed the Federal Reserve’s interest-rate increase earlier in the week.

With no major FTSE 100 results scheduled, retail sales, central-bank policy and movements in commodities are expected to determine London’s early direction.