Blue-chip European stocks were mixed on Friday morning, with a more robust than expected US producer price reading sapping some vigour out of equity markets, and focus now shifts to interest rate decisions from the Federal Reserve and Bank of England next week.
The FTSE 100 index fell just 3.50 points to 7,739.65. The FTSE 250 climbed 43.09 points, 0.2%, to 19,529.10, and the AIM All-Share added 1.52 points, 0.2%, to 739.62.
The Cboe UK 100 was flat at 775.20, the Cboe UK 250 added 0.2% to 16,942.54, and the Cboe Small Companies was up 0.1% at 14,672.80.
In European equities on Friday, the CAC 40 in Paris climbed 0.1%, while the DAX 40 in Frankfurt was marginally lower.
In Tokyo, the Nikkei 225 fell 0.3%, while the S&P/ASX 200 in Sydney ended 0.6% lower. The Shanghai Composite in China rose 0.5%, though the Hang Seng in Hong Kong slipped 1.4%.
The pound was quoted at $1.2740, rising ever-so-slightly from $1.2737. The euro faded to $1.0882 from $1.0887. Against the yen, the dollar bought JP¥148.69, up from JP¥148.25.
In New York on Thursday, the Dow Jones Industrial Average lost 0.4%, while the S&P 500 and Nasdaq Composite each fell 0.3%.
Numbers on Thursday showed US producer prices by 1.6% on-year in February, ahead of a forecast 1.1% climb. In January, prices had risen by 1.0% on-year.
Meanwhile, retail sales rose by 0.6% in February from January. They had been expected to rise by 0.8%, according to FXStreet, having fallen by 1.1% in January from December.
The US Department of Labor also released its initial weekly jobs report on Thursday.
In the week ending March 9, the advance figure for seasonally adjusted initial claims was 209,000, a decrease of 1,000 from the previous week’s revised total. The previous week’s level was revised down by 7,000 from 217,000.
This was lower than the market consensus of a rise to 218,000.
‘All eyes are on next week’s Federal Open Market Committee meeting. The Fed will update its dot plot having seen a two-month jump in inflation, robust jobs data, a relatively strong GDP print and healthy earnings. There is a chance that we see the median forecast show no more than two rate cuts pencilled in by the Fed members for the year – instead of three plotted at December’s dot plot. We will walk into next week’s FOMC meeting with a hawkish tilt knowing that it’s always better for the Fed not to act too early than to be forced to make a U-turn on the way,’ Swissquote analyst Ipek Ozkardeskaya commented.
The Fed’s next decision is on Wednesday, and the Bank of England follows on Thursday.
Deutsche Bank analyst Sanjay Raja commented: ‘We expect very few changes in the March Monetary Policy Committee meeting. We see bank rate stuck at 5.25% for a fifth consecutive meeting. And we expect the MPC to stick to its February guidance that bank rate is restrictive and ’will need to remain restrictive for sufficiently long to return inflation to the 2% target’.
‘For now, we stick to our May call for the first rate cut. But our conviction levels have fallen, especially with little signalling from the MPC on when rate cuts could begin. We still maintain our call for bank rate to land at 3% by next summer. We will reassess our call following the March meeting.’
In London, Vodafone topped the FTSE 100, rising 4.3%. It has agreed to sell its Italian business to Swisscom for €8 billion and will return half of the proceeds to shareholders.
The Berkshire, England-based telecommunications provider late last month had confirmed it was in exclusive talks with its Bern, Switzerland-based peer to sell the operations in Italy. This was after Vodafone in late January turned down a merger proposal for Italy from France’s Iliad SA.
Vodafone on Friday said it will receive €8 billion in upfront cash from Swisscom. It will return €4 billion of this as a share buyback in the new financial year.
Vodafone noted that the Italian sale follows a similar disposal of its Spanish arm, raising €12 billion in total.
‘Today, I am announcing the third and final step in the reshaping of our European operations,’ said Chief Executive Margherita Della Valle.
‘Going forward, our businesses will be operating in growing telco markets - where we hold strong positions - enabling us to deliver predictable, stronger growth in Europe. This will be coupled with our acceleration in B2B, as we continue to take share in an expanding digital services market.’
Scottish Mortgage added 1.7% as it set out a buyback plan of its own. It has set aside £1 billion for share buybacks over the next two years, and the tech sector-focused investor hailed ‘strong operational results’ from its portfolio.
Scottish Mortgage added: ‘Collectively, portfolio companies have adapted to a higher cost of capital and are funding their future growth. Against this backdrop and having further strengthened the company’s balance sheet, the board now intends to take more concerted action to address the discount to net asset value at which the company’s shares continue to trade.’
Free cashflow from portfolio companies ‘more than doubled over the past year’, it added.
Manager Tom Slater said: ‘We own a portfolio of established companies achieving rapid expansion, propelled by enduring structural trends. Advances in foundational technologies are unlocking exciting new products, services, and business models. These well-funded public and private companies are shaping the future of the economy. The stock market has yet to fully recognise their progress, which creates the opportunity for us to buy the portfolio for less than its market value. In doing so, we can provide liquidity and augment returns for our shareholders. We intend to pursue this opportunity with conviction.’
Packaging firms Mondi and Smurtfit Kappa climbed 2.1% and 2.5%. Jefferies lifted Mondi to ’buy’ from ’hold’. JPMorgan raised Smurfit to ’overweight’ from ’equal weight’.
Volution rose 6.6% as it predicted consensus-topping annual profit. The energy-efficient indoor air quality solutions firm said pretax profit in the six months to January 31 rose 28% to £29.0 million from £22.6 million. Revenue rose 6.3% to £172.5 million from £162.3 million.
In addition, it lifted its interim dividend by 12% to 2.8p per share from 2.5p.
Its UK residential-focused offering led the charge, amid weakness in a ‘difficult’ UK original equipment manufacturer division, as well as in Continental Europe.
‘We made strong progress in the first half of the year, against a backdrop of higher interest rates and weaker new build demand. UK residential was once again the standout performer, with tighter regulation and strong social housing demand continuing to drive activity levels. Our greater exposure to refurbishment supported organic revenue growth in the period, and inorganic growth was strong due to a good performance from our recent acquisitions,’ Chief Executive Officer Ronnie George said.
Volution expects full-year adjusted earnings per share to be ‘slightly ahead of consensus’ of 26.1 pence. For the first half, its basic adjusted EPS rose 10% to 13.7p from 12.4p, while its adjusted diluted EPS climbed 11% to 13.5p from 12.2p.
Elsewhere in London, Wishbone Gold rose 26% as it hailed ‘positive drilling results’ from its Cottesloe project in Western Australia.
‘The information gathered to date is highly encouraging, confirming the overall exploration model for a major sediment hosted metals system focused on base metals and silver,’ it said.
‘The base metals identified are critical to the development of lithium-ion batteries used in electric vehicles and in energy storage systems integral to the global push towards lower carbon emissions.’
Gold was quoted at $2,166.96 an ounce early Friday, from $2,154.76 at the time of the London equities close Thursday. Though still in lofty territory, the precious metal is largely unmoved from the $2,161.77 it bought this time last week.
Brent oil fetched at $85.05 a barrel early Friday, up from $84.91 late Thursday. This time last week, the North Sea benchmark traded at $83.59.
‘Higher oil prices, of course, add another layer of complexity to the inflation outlook,’ SPI Asset Management analyst Stephen Innes commented.
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