U.K. stocks finished in negative territory Friday, dragged down alongside the broader European equity market, on mounting concerns that Turkey’s currency crisis will metastasize to eurozone lenders. However, London’s blue-chips index retained a slight weekly gain on the back of persistent sterling weakness.
U.K. stocks were little changed after a reading of British economic growth came in line with expectations.
How markets are moving
The FTSE 100 (FTSE:UK:UKX) fell 1% to 7,667.01. On Thursday, the index lost 0.5%, marking its sharpest daily slide since Aug 2, according to Dow Jones Market Data. But for the week, the benchmark eked out a gain of about 0.1%.
The pound (XTUP:GBPUSD) fell to $1.2757 from $1.2824 late Thursday in New York.
What’s driving markets
Equities across the region (STOXX:XX:SXXP) stumbled following a Financial Times report that the European Central Bank is growing more concerned about exposure of European banks to Turkey’s woes. The Turkish lira (XTUP:USDTRY) was sent plunging to its lowest in a year against the U.S. dollar on Friday.
The euro (XTUP:EURUSD) also dropped against the dollar “as investors feared European banks exposure to the lira. The common currency broke below the key $1.1500 support mark for the first time in more than a year. The fears also rippled to [the pound-dollar pair] which took out the $1.2750 barrier in early London dealing,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management.
Spain’s BBVA SA (MCE:ES:BBVA) (NYS:BBVA) , Italy’s UniCredit SpA (MIL:IT:UCG) and France’s BNP Paribas SA (PAR:FR:BNP) are among the biggest lenders to Turkey and have come under closer scrutiny by the Single Supervisory Mechanism, the ECB’s arm charged with monitoring the region’s banks, according to the FT report.
Meanwhile, retail stocks ended lower as upscale apparel and accessories retailer House of Fraser went into administration after a collapse in talks between the company and its creditors. But Sports Direct International PLC has purchased the struggling chain for £90 billion, expanding a stake already held in House of Fraser by Sports Direct’s owner, Mike Ashley.
Stocks in focus
Among banking stocks, Barclays PLC (LON:UK:BARC) gave up 2%, Standard Chartered PLC (LON:UK:STAN) lost 1.9% and HSBC Holdings PLC (LON:UK:HSBA) (NYS:HSBC) fell 0.6%. Royal Bank of Scotland Group PLC (LON:UK:RBS) slipped 1.7%. RBS was upgraded to a buy rating from neutral on Friday at UBS, which said in part that RBS’s stock hasn’t tracked positive per-share earnings revisions.
Among retailers, apparel seller Next PLC (LON:UK:NXT) fell 1.3% and department store operator Marks & Spencer Group PLC (LON:UK:MKS) gave up 1.1% but Debenhams PLC rose by 1% off the FTSE 100 as Mike Ashley holds a stake in that department store.
Ryanair Holdings PLC shares (LON:UK:RYA) fell 4.2% as the airline said it plans to operate 85% of its schedule Friday as pilots in five European countries take strike action. That is the fifth strike action since July 12.
Diageo PLC (LON:UK:DGE) was off by less than 0.1%, even after the maker of Gordon’s Gin and Smirnoff vodka said it would start buying back up to 1.4 billion pounds ($1.79 billion) of its shares until Jan. 31.
The U.K. economy expanded at a rate of 0.4% in the three months to June, bolstered by construction and services activity, a faster rate than 0.2% in the first quarter of 2018. The economy expanded at an annualized rate of 1.5% in the second quarter, the Office for National Statistics said Friday, faster than the 0.9% rate in the first quarter.