London’s FTSE 100 made a tentative gain on Friday afternoon, pushed higher by Shell and BP, though the advance could be short-lived if a key US inflation reading disappoints.
The Federal Reserve’s preferred inflationary tracker is released at 1330 BST. While economists expected both the headline and core readings to ebb, a hotter-than-expected print could send stocks lower and make investors rethink their Fed interest rate expectations.
Elsewhere, London-listed banking stocks were also lower, after an eventful and poorly-received update from NatWest.
The FTSE 100 index was up 11.45 points, or 0.2% at 7,366.02. The FTSE 250 was up 84.77 points, 0.5%, at 16,867.86, and the AIM All-Share was up 3.53 points, 0.5%, at 673.37.
The Cboe UK 100 was up 0.1% at 734.75, the Cboe UK 250 was up 0.6% at 14,608.94 and the Cboe Small Companies was up 0.1% at 12,564.48.
Oil prices climbed on Friday, though so far not by enough to stave off a weekly loss. Brent oil was quoted at $88.71 a barrel at midday in London on Friday, up from $87.74 late Thursday. Gold was quoted at $1,983.52 an ounce, higher against $1,978.13.
This time last week, a barrel of Brent fetched $93.37.
Latest developments in the Middle East ensured oil be ‘bid’ going into the week, SPI Asset Management analyst Stephen Innes said.
Innes commented: ‘Reports of Israeli tanks carrying out raids Into Gaza should see gold and oil hold a bid into the weekend, even if the right side tail looks thin( on gold) against the backdrop of higher real rates.
‘The current conflict in the Middle East has not significantly impacted the oil supply. And while there has been a limited reduction in natural gas volumes, such as the shutdown of the Tamar natural gas field in Israel, this has only slightly affected global [liquefied natural gas] exports in October.’
In London’s Shell gained 2.0% while BP rose 1.8%. Gold miners Fresnillo and Endeavour Mining added 2.8% and 1.6%.
NatWest was by far the worst performing FTSE 100 stock, losing 10%.
NatWest reported that in the third quarter of 2023, total income rose to £3.49 billion from £3.23 billion a year earlier. Operating pretax profit rose to £1.33 billion from £1.09 billion.
The firm cut its margin outlook for the year, however. It now expects a full-year bank net interest margin ‘to be greater than 3%’. It had previously predicted an outcome below 3.20% ‘with a current view of around 3.15%’.
Eyes were also on the Travers Smith review, which oversaw of the controversial closure of Nigel Farage’s Coutts account.
It said the decision to close Farage’s bank account was ‘lawful’. However, it identified a ‘number’ of shortcomings in how the decision was reached, how the bank communicated with Farage and how it treated his confidential information.
‘Investors didn’t take long to turn their attention to an equally damaging profit downgrade. Guidance on the net interest margin has been lowered as any benefit from higher interest rates seems to be evaporating,’ said AJ Bell analyst Russ Mould.
‘Higher interest rates have not been the panacea for the sector that some might have hoped, with NatWest shares notably trading below the level they traded at before the current rate hiking cycle began.’
In a negative read across, Lloyds lost 2.1%, Barclays fell 1.4% and Virgin Money gave back 1.3%. OSB Group bucked the trend, adding 1.8%, however.
International Consolidated Airlines Group fell 0.8%.
IAG reported that revenue in the third quarter of 2023 rose to €8.65 billion from €7.33 billion a year earlier. Pretax profit climbed 57% to €1.58 billion from €1.01 billion.
Looking ahead, IAG said it expects ‘2023 to be a year of strong recovery.’ It added that overall customer bookings for the fourth quarter are as expected.
In the FTSE 250, Digital 9 Infrastructure rose 5.9%, after it said it is assessing a divestment of its entire stake in the Verne Global group of companies.
It said it has received indicative offers from interested parties to syndicate a majority stake in Verne Global to an unnamed ‘strategic capital partner’, with executed terms expected to be announced in the fourth quarter of 2023.
Compared with the syndication, the board believes the proposed transaction would enable the company to ‘accelerate its balance sheet deleveraging, deliver the cash resources necessary for the company and group to strengthen their position, and further maximise shareholder value’.
On AIM, FireAngel shares surged to 6.3 pence, from 2.10p.
FireAngel said it has reached an agreement with Intelligent Safety Electronics for its takeover. ISE is a company incorporated in Singapore and wholly-owned by Siterwell Electronics. ISE currently holds about 17.5% of FireAngel’s issued shares.
Under the terms of the offer, FireAngel shareholders will receive 7.40p per share in cash. This values the company at about £27.7 million.
Elsewhere in London, XP Power gained 8.0%.
The company that designs and manufactures power controllers said that revenue in the third quarter of 2023 was £75.1 million down from £79.4 million. However, operating profit was slightly ahead of its expectations due to a better outturn in September.
Trading in October was ‘at least’ in line with company expectations, while it said it has undertaken a number of important cost reduction and cash preservation actions that will benefit the remainder of 2023 and 2024.
In European equities, the CAC 40 in Paris was down 0.5%, while the DAX 40 in Frankfurt was up 0.5%.
The pound was quoted at $1.2127 at midday on Friday in London, higher compared to $1.2105 at the equities close on Thursday. The euro stood at $1.0563, up against $1.0527. Against the yen, the dollar was trading at JP¥150.02, lower compared to JP¥150.48.
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 index up 0.5%, and the Nasdaq Composite 0.9% higher.
Still to come on Friday is the latest US core personal consumption expenditures at 1330 BST. The annual core PCE reading, the Fed’s preferred inflation marker, is to ease to 3.7% in September from 3.9% in August, according to consensus cited by FXStreet.
‘The downtrend in inflation and the recent rise in Treasury bond yields add to expectations that the Fed will keep interest rates unchanged next week, although strong economic activity as evidenced by yesterday’s Q3 GDP report, if maintained, could complicate the policy outlook further out,’ analysts at LLoyds Bank commented.
The next Federal Reserve decision is on Wednesday.
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