FTSE closes flat as cloud hangs over stock markets

European stock markets slipped into the red on Friday, falling after a stronger open as eurozone inflation data showed a cooling in June.

Data from Eurostat revealed that consumer prices in the 19-nation single-currency bloc rose 1.9% last month, slightly less than May’s annual rate of 2%.

May marked the first time since 2018 that inflation had exceeded the European Central Bank's target of "below, but close to" 2%. A deceleration raises fears that economic momentum could be flagging.

Core inflation, which excludes volatile unprocessed food and energy, was stable at 0.9%.

In London, the FTSE 100 (^FTSE) dropped almost 0.1% on the day, slipping below 7,000 points an hour before closing but managing to recover to close at 7,008. The French CAC (^FCHI) tumbled 0.5% and the DAX (^GDAXI) was down 0.6% in Germany.

Travel and leisure stocks were among the top risers on the FTSE despite concerns surrounding the spreading Delta variant of COVID-19. Daily cases in the UK hit a six-month high of 48,553 on Thursday. Traders instead seemed to be looking towards the full reopening of the UK economy on Monday.

Watch: UK 'not out of the woods yet' and pandemic 'has got a long way to run', Professor Chris Whitty warns

Across the pond, the S&P 500 (^GSPC) was down 0.2% by the time of the European close and the tech-heavy Nasdaq (^IXIC) was more than 0.2% lower. After a positive start, the Dow Jones (^DJI) slipped 0.3%.

"We got a lot of optimism for the earnings, but then you've got fear of inflation and that's kind of giving us a whipsaw market," said Dennis Dick, a proprietary trader at Bright Trading.

US retail sales rose 0.6% in June, against an expected decline of 0.4%. May’s decline was revised to show a bigger fall of 1.7%, according to figures from the Commerce Department.

Excluding automobiles, gasoline, building materials and food services, which tend to be volatile, retail sales climbed 1.1% last month following May’s downwardly revised 1.4% decline. Nine of 13 retail categories reported sales increases, including electronics and appliance outlets, clothing stores and restaurants.

“US consumer spending has been fairly stop-start this year, with the significant amounts of fiscal stimulus, helping to drive a rebound in consumption, but the recovery has been patchy with significant numbers of US consumers choosing not to spend all of their stimulus windfalls,” Michael Hewson of CMC Markets said.

Watch: US June retail sales rise unexpectedly

Asian shares were mostly lower on Friday as investors cashed in on profits at Taiwanese chip giant Taiwan Semiconductor Manufacturing Company (TSM).

Despite posting record profits, the company, which is Asia’s largest firm by market cap outside of China, closed 5.5% lower, weighing on other tech firms and broader risk sentiment.

The world's largest contract chipmaker revealed record sales in the last three months and forecast higher revenue for the current quarter, but traders raised concern.

Read more: The chip shortage bringing car factories to a standstill

In Japan, the Nikkei (^N225) lost 1%, after the Bank of Japan left monetary policy unchanged and downgraded its growth forecast for the current year from 4% to 3.8%. It also revised up its inflation forecast from 0.1% to 0.6% on the back of increasing energy costs and commodities prices.

The Hang Seng (^HSI) gained 0.2% in Hong Kong and the Shanghai Composite (000001.SS) dipped 0.7% on the day.

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