International stocks fell back from Thursday’s highs amid the UK economy shrinking and fears of a looming prolonged recession.
The FTSE 100 started the day on a good footing, but slipped into the red by the time the week drew to a close.
It was down 0.78%, or 57.3 points, to 7,318.04 points.
It comes as official figures showed the UK economy shrank by 0.2% between July and September – meaning that if it sinks further this year, the nation will have entered a recession.
Experts warn that it could be the longest recession in a century, lasting for two years.
But the figures were not a big shock to the markets, which had priced in a decline, and optimism from Thursday’s promising US inflation reading lingered.
Furthermore, fresh reports that China was easing some of its Covid restrictions provided fresh hope to investors at home and overseas.
Michael Hewson, chief market analyst at CMC Markets UK, said: “European markets got off to a strong start today, building on yesterday’s US CPI-inspired gains, after China announced it was relaxing some of its Covid quarantine restrictions.
“However the momentum has started to tail off heading into the weekend.
“The FTSE 100 has found itself slipping back with the more defensive areas of the market coming under pressure.
“Nonetheless it’s still been a strong week for markets generally, with the German Dax closing higher for the sixth week in a row.
“It’s hard to escape the feeling that once again markets appear to be getting slightly ahead of themselves, given that the quarantine time in China is still quite long, and that Covid infection rates are rising and not decreasing, with Guangzhou, a city of over 15 million people, on the brink of a new lockdown.”
The German Dax closed 0.56% higher, while the French Cac was up 0.58%.
Over in the US, votes from the midterm elections are still being counted, three nights since the polls closed. The nation’s top indices were far less spirited on Friday, after the S&P 500 surged passed 4.5% on Thursday.
The S&P had edged up by 0.15% when European markets closed, and Dow Jones was down about 0.66%.
The pound has enjoyed a rebound in the second half of the week, hitting well above 1.17 US dollars and hitting a six-week high on Friday.
It was up 0.8% against the dollar to 1.1794, but fell 0.4% against the euro to 1.1414 when European markets closed.
In company news, arts and crafts retailer The Works saw its shares slide despite posting stronger sales and assuring investors that shoppers will want to celebrate Christmas in a “more affordable way”.
The retailer said it was cautious that consumer spending might be impacted by inflation and rising interest rates. Its shares were down by 5.5%.
Housebuilder Redrow told shareholders that it was buying less land and that the value of private reservations was down on last year.
The firm said that financial instability had rocked the housing market and that the business has had to adapt to the changing economic outlook.
Shares in Redrow fell by 0.38%.
The biggest risers on the FTSE 100 were Ocado Group, up 98.8p to 812p, B&M European Value Retail, up 28.3p to 385.5p, Prudential, up 70.9p to 1,000.5p, Anglo American, up 219p to 3,351p, and Antofagasta, up 78p to 1,429.5p.
The biggest fallers on the FTSE 100 were BAE Systems, down 63p to 714p, GSK, down 84.6p to 1,323.6p, Relx, down 142p to 2,235p, Astrazeneca, down 560p to 10,598p, Compass Group, down 89.5p to 1,788p, and Imperial Brands, down 99.5p to 1,993.5p.