The FTSE 100 declined 0.6% on Friday, extending its weekly losses to 1.1% after China announced an increase in the reserve requirement for its banks by another 50 basis points in the latest attempt to curb soaring inflation.
Further restrictions on lending are aimed at halting the increase in inflation, which reached 4.4% in October, well above the government’s 3% target.
The Chinese government’s continuing efforts to put inflation under control are negatively impacting imports of oil and raw materials, reducing demand and prices.
China is the world’s second largest energy consumer behind the US.
Ireland’s debt situation seems to be coming close to a resolution with officials now saying that the country could soon accept a bailout from the European Union to provide aid for its banking system.
Officials from the European Central Bank (ECB), the European Commission and the International Monetary Fund (IMF) arrived in Ireland this week to determine whether Ireland is capable of supporting its banks without requesting help from the EU.
Uncertainty over Ireland’s debt situation has pushed up borrowing costs for other eurozone nations with high sovereign debts, including Spain, Portugal and Greece.
Meanwhile, the ECB said that it does not intend to reason to the ongoing debt woes by loosening its monetary policy.
This week’s economic data included an update on UK retail sales, which showed a month on month increase of 0.5% in October, marking the first gain in three months.
Jobs data also was positive, revealing that the number of people claiming unemployment benefits in the UK declined by 3,700 to 1.47 million in October, while an increase was expected.
The unemployment rate was unchanged at 7.7%.
Minutes from the latest policy meeting of the Bank of England showed another three way split in the Monetary Policy committee with one member voicing support for more stimulus and another voting to hike interest rates.
Friday’s top risers included chipmaker ARM Holdings (LON:ARM) and hedge fund manager Man Group (LON:EMG), which added nearly 4%.
Essar Energy (LON:ESSR) and International Power (LON:IPR) added 2.4% and 2% respectively.
Software developer Sage Group (LON:SGE) was at the bottom of the pile with a 3% decline.
Bank Standard Chartered (LON:STAN) and retailer Marks & Spencer (LON:MKS) lost about 2.5%.
In the US, the Dow Jones Industrial Average (DJIA) managed to post gains on Friday following a late surge, closing with a 0.2% gain and nearly unchanged from last Friday.
Hewlett-Packard (NYSE:HP) was in the lead, advancing 1.9%.
American Express (NYSE:AMX) and DuPont (NYSE:DD) tacked on 1.2%.
General Electric (NYSE:GE) and Home Depot (NYSE:HD) climbed 1.1%.
Boeing (NYSE:BA) was the heaviest faller in DJIA with a 1.58% loss.
Disney (NYSE:DIS) declined 1.5%.
The broader S&P 500 index gained 0.25%. The technology heavy NASDAQ composite tacked on 0.15%.
The FTSE 100 is currently projected to open with a 0.4% gain on Monday, while futures for the Dow Jones index were unchanged.