European stocks were higher going into Friday afternoon, as investors focused on potential clues about future monetary policy from both sides of the Atlantic.
The Jackson Hole meeting will see both Federal Reserve Chair Jerome Powell and and Bank of England Governor Andrew Bailey speak on Friday.
In other news, energy bills are set to increase by almost £150 after Ofgem raised its price cap, in bad news for households across Britain.
The FTSE 100 index was up 26.96 points, 0.3%, at 8,314.96. The FTSE 250 was up 28.28 points, 0.1%, at 21,132.98, and the AIM All-Share was up 1.46 points, 0.2%, at 776.19.
The Cboe UK 100 was up 0.5% at 831.47, the Cboe UK 250 was up 0.1% at 18567.84, and the Cboe Small Companies was down marginally at 16,983.02.
Chinese President Xi Jinping said Friday he hoped to achieve ‘common wins’ with the UK in his first conversation with new UK Prime Minister Keir Starmer, state broadcaster CCTV reported.
China was Britain’s fifth-largest trading partner as of 2023, according to official UK statistics, but diplomatic relations have been icy in recent years as the countries sparred over Beijing’s tightening control over former British colony Hong Kong. During a phone call between the two leaders on Friday afternoon, Xi congratulated Starmer on assuming the prime minister’s role last month, CCTV said.
‘China is willing to conduct equal dialogue with the UK side on the basis of mutual respect... (and) expand cooperation in the fields of finance, green economy, artificial intelligence, etc.,’ Xi was quoted as saying.
In European equities on Friday, the CAC 40 in Paris and the DAX 40 in Frankfurt were both up 0.6%.
Stocks in New York were called higher. The Dow Jones Industrial Average was called up 0.3%, the S&P 500 index up 0.5%, and the Nasdaq Composite up 0.8%.
“The markets will be looking for Powell to provide clues not just on the Fed‘s next meeting in September but also for the remainder of the year and into 2025,‘ said AJ Bell’s investment analyst Dan Coatsworth.
“Like the support act for Taylor Swift coming out second, Bank of England governor Andrew Bailey has the tough slot of following Powell at Jackson Hole, but he may, nonetheless, provide some important insights on the likely trajectory of rates on this side of the Atlantic.’
The annual Jackson Hole summit kicked off on Thursday, and will last for three days.
Friday is the big day, with Powell and Bailey taking the spotlight, they are due to speak at 1500 BST and 2000 BST, respectively.
Investors will hoping Powell signals an interest rate cut will occur at the Fed’s next meeting in September.
Peel Hunt’s Kallum Pickering said: ‘We anticipate that markets will be looking for signals from Powell on whether the Fed will cut by 25bps or 50bps in September (25bps is most likely, in our view) and from Bailey on whether the BoE will pause in September or cut again (pause is most likely, in our view).’
Minutes from the last Fed meeting in July, released on Wednesday, showed the ‘vast majority’ of participants ‘observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting.’
Back in London, the average household energy bill is to increase by 9.5% from October after Ofgem said it was increasing its price cap as households approach the winter months.
The regulator announced it is hiking its price cap from the current £1,568 a year for a typical household in England, Scotland and Wales to £1,717, adding around £12 a month to an average bill.
However, it is around £117 cheaper than the cap in October last year, which was set at £1,834.
Meanwhile, data showed that UK consumer confidence remained in steady this month, with expectations for personal finances improved as interest rates start to come down but with concern about the wider economy growing.
The GfK consumer confidence index registered a score of negative 13 points in August, the same as July. The index was compiled by research house GfK from a survey among 2,003 adults in the UK, with interviewing conducted between August 1 and 15.
The pound was quoted at $1.3118 at midday on Friday in London, up compared to $1.3091 at the equities close on Thursday. The euro stood at $1.1117, higher against $1.1110. Against the yen, the dollar was trading at JP¥146.05, lower compared to JP¥146.08.
In the FTSE 100, Melrose Industries fell 6.3% to the bottom of the index, as UBS questioned the value of the firm’s Revenue & Risk Sharing Partnership portfolio.
The broker has switched its valuation methodology from P&L to free cash flow-based tools, consistent with treatment of peers like Rolls Royce.
This has resulted in a new share price target for Melrose of 400 pence, nearly halved from 770p before.
‘We believe the stock is largely, but not completely, valued by the market as a pure play engine manufacturer, though this is beginning to change as analyst rotation to sector specialists progresses, and focus is turning to cash flow,’ the broker added.
As a result, UBS double-downgraded Melrose, the Birmingham, England-based aerospace firm, to ’sell’ from ’buy’.
In the FTSE 250, Direct Line lost 1.8%, after it said a miscalculation has been found in its Solvency II capital ratio for 2023, which means it was lower than previously reported.
The London-based car and home insurer said the error arose particularly in the translation of the reinsurance debtors between IFRS and Solvency II own funds, and the error will not have an impact on the IFRS figures.
Amending the error, the company said its year-end solvency capital ratio was revised down to 188% from 197%. It noted this is still above its risk appetite range of 140% to 180%.
Elsewhere in London, Evoke edged up 2.8%.
Evoke is a Gibraltar-based betting and gaming operator, formerly known as 888 Holdings and owner of William Hill, 888, and Mr Green brands.
It announced the acquisition of New Gambling Solutions SRL, the operator of Winner.ro, an online betting and gaming operator in Romania.
Evoke said it will inject its Romania business and a consideration of €10 million in exchange for a 51% share in the enlarged Romania business, bringing together 888.ro with Winner to create the fourth largest group in the Romanian market with a combined market share of around 7%.
Brent oil was quoted at $77.82 a barrel at midday in London on Friday, up from $77.38 late Thursday. Gold was quoted at $2,497.20 an ounce, higher against $2,478.64.
Still to come on Friday’s economic calendar, there is US new home sales data out at 1500 BST.
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