Early market roundup: London stocks slip as AI fears, oil prices weigh

London stocks opened lower on Friday as lingering concerns over AI spending and surging oil prices weighed on sentiment, while weaker-than-expected UK retail sales added to the cautious mood.

The FTSE 100 index fell 9.72 points, 0.1%, at 10,715.31. The FTSE 250 edged down 16.43 points, 0.1%, at 24,195.28, and the AIM all-share fell 1.82 points, 0.2%, to 749.11.

The Cboe UK 100 traded down 0.1% at 1,064.01, the Cboe UK 250 was flat at 21,292.11, while the Cboe small companies was down 0.1% at 19,005.15.

In mainland European equity markets on Friday, the CAC 40 in Paris was down 0.3%, while the DAX 40 lost 0.4%.

Sterling traded at USD1.3379 on Friday morning, up from USD1.3365 at the time of the London equities close on Thursday. Against the euro, it rose to EUR1.1936 from EUR1.1933.

The euro was steady at USD1.1200 against USD1.1201. Against the yen, the dollar fell to JPY157.07 from JPY157.20.

The yield on the US 10-year Treasury was quoted at 4.98%, narrowing from 5.02% late Thursday afternoon UK time. The yield on the US 30-year Treasury was quoted at 5.30%, narrowing from 5.33%.

In Tokyo on Friday, the Nikkei 225 fell 0.3%. The Shanghai Composite in China rose 0.9%, as sentiment recovered in afternoon dealings. The Hang Seng Index in Hong Kong was up 0.9%. The S&P/ASX 200 ended flat.

In the US on Thursday, performance on Wall Street was mixed, with the Dow Jones Industrial Average marginally higher, the S&P 500 down 1.2% and the Nasdaq Composite down 2.6%.

Meta dropped 7.0% despite reporting better-than-expected third-quarter revenue. Chipmakers followed suit as Wall Street scrutinised artificial intelligence spending. Advanced Micro Devices fell 8.1%, while Micron Technology and Nvidia dropped 6.3% and 4.4%, respectively.

Swissquote analyst Ipek Ozkardeskaya commented: "Nope, it wasn't enough. Strong tech earnings this week - especially Meta's report, showing investors that its AI investments are paying off and that Q3's cash burn was much, much lower than analysts expected - couldn't ease fears about that high-speed spending. Meta shares - initially higher in after-hours trading - took a major U-turn.

"Meta's credit risk surged to a record high, with USD825 billion committed to future leases and contracts, largely related to its AI buildout. Five-year CDS spreads for Oracle, SpaceX, Amazon and Nvidia also spiked to fresh records."

Away from AI, eyes remain on the French fiscal situation. The yield on the French 10-year government bond was at around 5.07% early Friday, while the German counterpart was at 3.32%, a spread of some 175 basis points.

"The euro's sensitivity to France has clearly diminished, with the common currency not materially underperforming G10 peers yesterday. That link may, however, re-establish very rapidly should a new pain level - perhaps 200bp - be breached. We aren't expecting that much further widening for now, but the risks are clearly there, and the euro remains rather unattractive across the board," analysts at ING commented.

"Today's PMIs will probably play a secondary role to France, which faces a Moody's credit review, and global equities. Expectations are for slightly softer numbers compared to September."

A eurozone flash purchasing managers' index reading is out at 0900 BST, before the UK data at 0930.

UK retail sales were weaker than expected in September, declining on month and growing at a slower pace on-year, numbers from the Office for National Statistics showed on Friday.

The ONS said retail sales volumes fell 0.4% in September from August. They had risen 0.7% in August from July, upwardly revised from an initially reported 0.5% climb.

September's monthly reading fell short of the consensus, with a smaller 0.1% decline forecast, according to FXStreet.

On-year, retail sales rose 0.8% in September, slowing markedly from a 2.7% climb in August. A rise of 1% had been expected for last month, according to consensus cited by FXStreet.

It represents the weakest annual retail sales performance since a 0.3% fall in April.

Brent surged to USD114.45 a barrel early Friday, from USD111.18 late Thursday afternoon. Brent traded around its highest level since early May.

Gold was quoted at USD4,015.61 an ounce, fading from USD4,054.71. Gold fell to an intraday low of USD3,986.71, its weakest level since July.

In London, the bulk of the FTSE 100 traded in the red, though Shell and BP were among the best performers, up 1.2% and 1.9%, tracking oil higher.

Among the FTSE 250, Lancashire fell 2.6% as Barclays cut the stock to 'underweight'.

Elsewhere, boohoo rose 4.0%. Debenhams owner boohoo group reported its first statutory pretax profit in five years, as its "turnaround continues at pace".

The fashion retailer said pretax profit in the six months to August 31 amounted to £28.3 million, swinging from a £17.9 million loss a year prior. Profit was supported by a £40.6 million non-cash credit from the sublease of a US distribution centre.

Revenue, however, fell 3.0% to £409.6 million from £422.4 million.

"The turnaround continues at pace. The group has returned to GMV growth, gross margins are expanding and returns rates lowering," Chief Executive Officer Dan Finley said. "This is the first time the group has delivered positive profit before tax since August 2021. I am pleased to report that net debt is expected to be negligible at year-end. This is significantly ahead of our original guidance provided at the start of the year. I see material opportunities ahead and we are fully focused on maximising them."

Live commerce company Huddled surged 10% as it announced a deal to buy AEWW, its partner on the Whatnot platform, for £290,000. The deal will be satisfied by issuing 38.7 million shares.

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