Stocks were largely in the green in London on Friday as markets look to the Bank of England after a week of interest rate decisions from central banks.
The FTSE 100 index closed up 14.46 points, or 0.2% at 7,642.72 - ending the week 1.1% higher.
The FTSE 250 ended marginally lower, down just 8.52 points at 19,030.89. The index ended the week 0.3% lower. The AIM All-Share closed up 1.03 points, or 0.1%, at 792.59, but ended the past five days down 0.2%.
The Cboe UK 100 ended up 0.2% at 762.46, the Cboe UK 250 closed flat at 16,620.50, and the Cboe Small Companies ended up 0.2% at 13,345.74.
In European equities, the CAC 40 in Paris ended up 1.3%, while the DAX 40 in Frankfurt ended up 0.4%.
With the June interest rate decision of the Fed, ECB and BoJ now out of the way, market focus will now turn to the Bank of England which announces its own rate decision on Thursday.
Markets are expecting the central bank to lift rates by another 25 basis points amid high and sticky inflation in the UK. A further 25bp hike in August is ‘likely’, should inflation data continue to come in hot, in the view of analysts at ING.
Amid the increasing bets of a hawkish Bank of England, the pound strengthened against the dollar on Friday.
Sterling was quoted at $1.2819 at the London equities close on Friday, up from $1.2759 at the close on Thursday. The pound had spiked as high as $1.2848 earlier in the day, a level not seen since April last year.
The euro held firm against the dollar following a 25 basis point hike from the ECB and Thursday and hawkish words from the Frankfurt-based central bank’s president.
The euro stood at $1.0926 at the London equities close on Friday, down a touch $1.0930 at the close on Thursday.
The ECB increased its benchmark deposit rate by 25 basis points to 3.5% on Thursday, as it also raised its inflation forecast and cut growth expectations.
In a press conference shortly after Thursday’s rate decision, Lagarde struck a decidedly hawkish tone, saying that it is ‘very likely’ that interest rates in the eurozone will continue to increase.
Against the yen, the dollar was trading at JP¥141.59 late on Friday, higher compared to JP¥140.52 late Thursday.
The yen underperformed against the dollar after the Bank of Japan said it would maintain its long-standing, ultra-loose monetary policy as it looks to boost economic growth.
It left its negative interest rate in place and did not adjust the band in which rates for 10-year government bonds fluctuate, a scheme known as yield curve control.
In London, Ocado, Centrica, and CRH were the top blue-chip performers at the close on Friday. The stocks were up 7.4%, 2.1%, 2.3%, respectively.
Tesco dropped 0.6% despite the supermarket chain saying it was seeing signs that inflation is easing in the grocery market, as it kicked off its financial year with a sales hike.
Tesco said revenue in the 13 weeks to May 27 - its first quarter - rose 9.4% to £15.17 billion. The measure excludes both VAT and fuel, but includes Tesco Bank.
Looking ahead, Tesco said it still expects retail free cash flow within its £1.4 billion to £1.8 billion target range. At best, this would be a 16% fall from £2.13 billion in financial 2023.
It still expects a ‘broadly flat level’ of retail adjusted operating profit. Retail adjusted operating profit fell 6.1% to £2.49 billion in financial 2023, from £2.65 billion.
Chief Executive Ken Murphy told investors he was cognisant of the fact that Tesco’s clientele continues to face ‘significant cost-of-living pressures’. He said the retailer would ‘keep working tirelessly to ensure customers receive the best possible value’.
GSK closed 0.7% lower after the pharmaceutical firm said the US Food & Drug Administration has extended the review period of the new drug application of momelotinib by three months.
Despite acknowledging the importance of gaining approval, analysts at Shore Capital said that delay ‘isn’t necessarily a red flag’ as it relates to allowing time to review additional data that have been recently submitted.
Shore posited that the extra review time could ‘potentially relate to the company seeking a line-agnostic label for the drug in myelofibrosis’. The broker argued that broader, line-agnostic approval could support some sales forecast upgrades.
In the FTSE 250, Travis Perkins remained the index’s worst-performing stock, closing down 6.8%.
The builders’ merchant said it had delivered a ‘resilient’ performance in the first quarter of 2023, but it has not seen an anticipated easing of market conditions in the second quarter to date.
‘Volumes in both the new build housing and private domestic RMI markets continue to be impacted by higher interest rates and weaker consumer confidence driven by persistent, higher than anticipated consumer price inflation,’ Travis Perkins said.
Elsewhere in London, Mears Group climbed 8.4%
The housing and social care provider said it has seen strong trading in the first five months of its financial year, with ‘continued elevated revenues, improving operating margins and excellent cash performance’. Consequently, the board expects full-year profits to be materially ahead of current market expectations.
On AIM, Marlowe surged 11% amid reports from Sky News that the company is exploring a potential sale of its testing, inspection and certification division with investment bankers at Rothschild & Co.
The division, which is currently under strategic review, constitutes the bulk of the firm’s revenue.
According to recent transactions in the sector cited by Sky, a sale of the unit could generate a valuation of up to 16 times its full-year profit, amounting to an estimated £650 million.
Stocks in New York were lower at the London equities close, with the Dow Jones Industrial Average down 0.1%, the S&P 500 index down 0.1%, and the Nasdaq Composite 0.3% lower.
Brent oil was quoted at $75.62 a barrel at the London equities close on Friday, up from $74.81 late Thursday. Gold was quoted at $1,960.83 an ounce, higher against $1,955.88 at the close on Thursday.
In Monday’s UK corporate calendar, there are full-year results from Triple Point Energy Transition and a trading statement from Finsbury Food.
The economic calendar next week has UK inflation data on Wednesday, ahead of an interest rate decision from the Bank of England on Thursday.
Financial markets in New York will be closed on Monday for the Juneteenth holiday.
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